News. Just three years ago, The Guardian was deep in crisis. After helping to make the one-time regional UK daily an international Pulitzer-winning brand with electrifying scoops on tabloid phone hacking, WikiLeaks, and Edward Snowden, longtime editor-in-chief Alan Rusbridger had quit. His amazing 20 years at the helm were suddenly buried by an avalanche of stories about the financial woes of the 198-year-old news brand. In 2015 and 2016, it had burned through a total of some £300m.
The embattled company told employees it was headed for a further cash “burn” of £90m in 2017, needed to cut staff costs, reduce its overheads and perhaps even scale back its international ambitions. It was a familiar enough scenario for daily newspapers. But, arguably, The Guardian’s not-for-profit ownership – and windfall investment gains – had made it more complacent than most.
The parent company had traditionally operated almost as a private-equity firm, with external shareholdings which had helped to fund the newspaper losses and capital investment. But, after years of bold expansion,The Guardian had to face the fact that, unless it stopped the losses, its £1bn of reserves might run out in 6-7 years.
It had been interesting to contrast The Guardian’s global strategy with that of two other long-established UK media brands, the Financial Times and The Economist. Both had built their businesses by investing gradually in US distribution and content, and changing the direction of what had once been UK-focussed journalism. These quiet strategies were seen to have become successful in growing sustainable international operations.
The Guardian was altogether more dramatic, evidenced by the descent into seemingly permanent losses immediately after a record 2011 EBITDA profit of almost £50m. Rusbridger’s expansion had always seemed more like a mission than a business plan. It was all about a free web site, with no plan to sell subscriptions, and only a vague idea of how to grow digital advertising sales, especially in the intensely competitive US market.
The Guardian is a liberal newspaper which – until 1959 – was known as the Manchester Guardian and was based in the UK’s industrial north-west. The big change came after its longest-serving editor Charles (C.P.) Scott bought the newspaper which – over 57 years – he had built into a nationally recognised daily. He bequeathed the paper to a charitable trust pledged to maintain its independence and its liberal politics and to reinvest whatever profit it made. The pledge had survived the trust’s conversion into a limited company which now also publishes The Observer, the world’s oldest Sunday newspaper.
The way this unique ownership structure emboldened the flagship paper was highlighted by Rusbridger who became editor-in-chief in 1995. He led the 2011 exposé of phone hacking and criminality by News Corp journalists in the UK. It was a Watergate moment and helped to define the newspaper, especially for its new audiences outside the UK.
It had come four years after the launch of Guardian America through which Rusbridger had sought to capitalise on his already substantial online readership in the US. In 2010, with other news brands including The New York Times and Der Spiegel, he produced reports on the war in Afghanistan based on a huge cache of classified documents from WikiLeaks.
In 2013, The Guardian won a Pulitzer Prize for its coverage of the US National Security Agency documents leaked by Edward Snowden. The revelations made the paper one of the world’s most visible news services, in much the same way as CNN had rocketed to global recognition as virtually the only news organisation in Baghdad at the start of the 1990 Gulf War. But there was a difference. Unlike CNN 20 years earlier, The Guardian’s financials were not transformed by its scoops. The digital-savvy paper managed to build a big reputation but little revenue, and that’s how it continued. But it always had a legion of admirers. The Economist described it as “the most stylish paper in the hyper-competitive British quality pack, the wittiest and best-designed, the strongest for features, the one most likely to reflect modern life.”
The newspaper’s financial reserves had been piled up primarily by an early 50% investment in digital winner AutoTrader. It eventually produced a windfall profit of more than £600m, which dwarfed disappointing investments in radio and B2B media. Rusbridger reasoned that the gains would help to bankroll his paper’s global digital development until it became profitable. But that was before newspapers got caught in the unending avalanche of falling print revenues and only low-growth online advertising. After almost 10 years of hoping that the promise of a bright new future was somehow guaranteed by soaring (free) web audiences, The Guardian and newspapers everywhere started to panic.
In 2015, Alan Rusbridger stepped down after a reign characterised by brilliant investigative journalism, but also by a profligacy that had seen the newspaper increase its staffing and costs throughout a decade when even its sleepiest competitors were doing the reverse. He had been due to become chair of the newspaper’s parent Scott Trust in 2016. But his successor Kath Viner and rookie CEO David Pemsel persuaded their trustee colleagues to withdraw the offer to their would-be boss, and Rusbridger angrily packed his bags.
Viner had been elected (yes) by the paper’s staff. She and Pemsel put together a three-year rescue plan to reduce total costs by 20%. They announced proposals to cut 250 jobs in the UK: the group’s global headcount had actually increased by 479 to 1,960 since its last round of redundancies in 2012. The urgent need for action belied the cool Viner-Pemsel declaration: “Our plan of action has one goal: to secure the journalistic integrity and financial independence of The Guardian in perpetuity.” They cut costs, cut jobs, out-sourced printing, and pushed digital ad sales.
They also pleaded for the financial support of their readers: “We need your support to keep delivering quality journalism, to maintain our openness and to protect our precious independence. Every reader contribution, big or small, is so valuable. Support The Guardian from as little as £1 – and it only takes a minute. Thank you.”
Now, just three years later, the plan has worked. The company’s recently-announced results for the 12 months ended March 31, 2019 tell a great story:
- Group revenues of £224.5m, up 3% (2018: £217.0m)
- Digital revenue of £125.3m, up 15% (2018: £108.6m)
- Group EBITDA loss (before exceptional items) of £3.7m (2018: £23m loss).
- Total value of endowment and cash holdings: £1bn
The subsidiary which publishes The Guardian and The Observer, actually made a profit of £800k in the 12 months ended March 2019, compared with losses of £19m in 2018 and £57m in 2017. It is the first EBITDA profit in almost 20 years.
Pemsel-Viner have succeeded in cutting that 20% from the cost base, resulting in a loss of 450 jobs, including 120 journalists. That achievement is matched by the modest revenue growth, a record 163m monthly uniques and 1.35bn page views in March this year. Together, it marked a triumph for their refusal to introduce a paywall – choosing to keep making the content available to everyone – and essentially to rely on voluntary contributions from readers. The publisher now has some 655k monthly paying “supporters” and has also received an additional 300k one-off contributions. Suddenly, The Guardian’s ambition to double that and achieve 2m “supporters” starts to look achievable.
While the breakthrough “profit” is calculated before exceptional costs of £29m on capex, redundancies and management, the company is now committed to ensuring that such costs remain within the £25-30m annual yield of the Scott Trust’s £1bn endowment.
Digital now accounts for 56% of total revenue, and 80% of advertising is digital. But the stand-out revenue performance has been the growth of the digital-only services in the US and Australia where revenues have doubled in the last three years to £30.8m. They are 14% of global revenue, and both businesses are now said to be profitable in their own right. They employ a total of 160 people (some 11% of the 1,455 global workforce) and have grown in line with revenues during the last two years. Even while cutting costs at home, The Guardian has become a real global brand.
Pemsel’s achievements, as an advertising-marketing executive breaking down the high walls of ‘church and state’ are illustrated by the company’s growing sales of sponsored editorial (content marketing) which still seems a counter-intuitive revenue source for The Guardian. But there’s nothing like a near-death experience for changing hearts and minds. And nobody needs reminding of the challenges that keep coming.
The next may be the printed newspaper itself. The Monday-Friday editions are currently selling an average of some 100k copies – 23% down in the last four years. Like the other UK national dailies, The Guardian depends on its magazine-laden Saturday edition with copy sales of more than double the weekday, at a 45% higher cover price – and attracting the majority of the newspaper’s print advertising. But even Saturday copy sales have declined by 20% over the four years, presumably held back by a 19% increase in cover price. It’s a similar story right across “Fleet Street”, where newspapers have had to persuade readers to pay a “realistic” price to counter their loss of advertising.
While nobody at The Guardian can (yet) contemplate life without a printed daily, the next big decision may be to merge the largely standalone Observer (selling some 150k copies every Sunday at £3.20) into the main newspaper by operating a single team for the seven days, as News Corp UK’s The Times/ Sunday Times is set to do. Ultimately, of course, a continuing fall in daily newspaper sales (and the retailers which sell them) will persuade publishers to cut back print, maybe to concentrate on the popular Friday-Monday editions. The Guardian’s digital-only success in Australia and the US may eventually help to persuade traditionalists that there is life after print in the UK.
But that’s for another day.
The immediate challenge is the crushing advertising dominance by Google, Facebook and (increasingly) Amazon. There is growing evidence that readers-users of quality news brands will pay for content (witness the New York Times, Times of London, The Australian, and The Guardian itself). But none could (yet) manage without any advertising at all. That reality dictates the need for increasing levels of sponsorship, paid-for content – and more revenue from readers. Bundling these news brands with complementary media and entertainment services might just help them to hold readers and push up subscription prices.
But there is room for new strategy too. Might The Guardian (and also the New York Times, 16% of whose subscribers are now from outside the US) ultimately consolidate its role as a global news brand by launching online streaming channels to compete with CNN, Sky News, Fox News, Al Jazeera, and the BBC?
The Guardian already produces substantial amounts of high-quality video each month, including news, short features and longer documentaries of up to 30 minutes. Over the past year, it has won international recognition including an Oscar nomination for Black Sheep (tackling racism in the UK), best short film award at Cannes for the documentary Skip Day (rites of passage for teens), and an award for “How Steve Bannon’s far-right ‘movement’ stalled in Europe” at the international Documentari Inchieste Giornalismi (DIG) Festival, which celebrates investigative journalism. It has a growing audience – and 1.8m subscribers – on YouTube with channels across news, culture and sport.
The New York Times’ TV news show The Weekly (launched in June on FX and Hulu) will have set Pemsel and Viner thinking about video, and also how to monetize the huge growth in audio.
While a much vaunted collaboration with Vice News lasted little more than a year, we might expect some future partnerships, especially with broadcasters around the world which have complementary skills but share with newspapers the need to grow their digital footprints. The Guardian could also be a non-predatory partner for digital independents.
The lessons of the New York Times (including its success in building 700k separate digital subscriptions for its Crosswords and Food apps) are that all media companies must devote resources to R&D and just trying things: you don’t know which will be the future winners. For The Guardian, that search already includes a full-throated return to the venture capital investing that provided its own financial safety net. Its GMG Ventures is a £40m fund which has early-stage investments in more than 20 media-tech startups.
The under-stated David Pemsel is entitled to feel pretty pleased with having made “this unique business model work and support Guardian journalism…. in 2015, many well-meaning people told us simply to cut costs and put up a paywall. The latter was something that felt fundamentally opposed to Guardian values – essentially taxing consumption, so we decided to follow a path where we asked our readers to contribute. Some people called it a begging-bowl strategy – which ignored the great nuances and sophistication of the editorial craft and digital commercial nous that went into making the strategy a success. It’s a great testament to this model that many publishers, even digital start ups, are now attempting to set up similar revenue streams.”
But, having got back to sustainability, The Guardian may now find it just as difficult to maintain this level of performance. Continually falling print volumes will tend to increase newspaper unit costs (even before you factor in the wild fluctuations in paper prices) and advertising yields may keep falling. And that’s without considering the possible impact on adspend of Brexit, trade wars and recession. But The Guardian turnround shows what can be done.
B2B. The Financial Times has bought a minority stake in The Business of Fashion, the digital media start-up for the fashion industry.
The FT is leading the digital media brand’s Series B funding round, alongside existing backers including Index Ventures, Felix Capital, and luxury product firm LVMH. It declined to disclose the size of the stake and the value of the funding. Imran Amed, BoF’s chief executive and editor in chief, founded the company in 2007 as a blogger with no experience in the fashion business. It raised some $2.1m from investors in 2013.
The London-based company claims an unlikely international audience of 5m for its online, print and events business, including 35k “members”. But its conferences have attracted big names, including Stella McCartney and Kim Kardashian. It claims to have a network of 100 contributors and staff based variously in London, New York, Paris and Shanghai.
In 2015, Fast Company magazine listed BoF as one of the 10 most innovative media companies because it “is telling a deeper story; it’s a news website dedicated to the less exciting, but all-important numbers side of the fashion industry. Founded by Canadian-British fashion expert Imran Amed, the site pays as much attention to Alexander Wang’s Spring/Summer collection as it does to Gucci’s years-long struggle to raise its stock prices. And the fashion world is tuning in with big names like Tory Burch and Oscar de la Renta chief executive Alex Bolen publicly citing Amed’s site as a power player in fashion industry news.”
BoF is believed to have revenue of some £5-10m. Its apparent success prompted Conde Nast this year to launch a competitor, Vogue Business.
The Canada-born Amed said the FT’s investment would allow the Business of Fashion to build up its membership business and to expand into adjacent sectors including beauty, watches and jewellery. It is believed the FT plans collaboration with the luxury magazines (eg How to Spend It) which it publishes with the newspaper’s weekend edition.
For the FT, the investment reflects a strategy to invest in subscriptions-based B2B media. It has sought to acquire the highly-successful, privately-owned The Information. Earlier this year, it bought a majority stake in the The Next Web digital media and events company.
Although Business of Fashion does produce some print, it is primarily a digital publisher and events organiser. Its emphasis on the business of fashion provides a contrast with the traditionally broad content of trade magazine brands. It’s an approach that invites replication in other sectors, especially perhaps as vertical integration by B2C media owners. Which is what Vogue thinks.
Sound + Vision. CBS and Viacom, which split in 2006, have agreed to a merger. Both US TV companies are controlled by the Redstone family through its National Amusements holding company. The deal values Viacom at $12bn and the combined entity at $30bn. “My father once said ‘content is king’, and never has that been more true than today” said Shari Redstone, chair of the board of the re-merged ViacomCBS. Viacom CEO Bob Bakish will lead the combined company with total revenues of over $28bn.
CBS began as a small chain of cinemas, invented the multiplex format and expanded into TV when it took over MTV and Nickleodeon owner Viacom in the 1980s. The company supplemented its broadcast network with acquisitions including Paramount Pictures, CBS and Simon & Schuster. It also owns Showtime, Comedy Central, BET, VH1, 28 local TV stations, and a 50% interest (alongside AT&T) in the CW TV network. Variety says the combined portfolio represents 140,000 episodes of TV and 3,600 films.
ViacomCBS is now led by a woman from the Redstone family along with a female dominated board, following years of male domination and accusations of sexual harassment which, among other things, forced the resignation of Les Moonves, longtime CEO – and opponent of Ms Redstone.
It will, however, remain a relatively small player by comparison with the likes of Disney-Fox and AT&T-Time Warner. Further consolidation must be expected if the newly-merged company is to compete globally.
The merger has been a longtime objective of Ms Redstone who has spent more than three years squabbling over it, not least with her ageing father. She now has the challenge of steering the company through tumultuous times for the moving pictures business. The FT noted this week: “Analysts warn that merging CBS and Viacom may not be enough to convince investors she is the right person to lead the group in the battles ahead. Despite what Shari accomplishes near-term by getting these two companies back together, her family’s name will not be associated with excellence in shareholder returns” referring to her father’s 2006 decision to separate the companies in the first place, and the lagging performance of Viacom stock in the past decade.
Variety reports rumours that the company could be about to buy Discovery Inc. and/or Lionsgate and also Starz its premium cable network. The fun is, presumably, just beginning
Magazines. The Spectator, the 191-year-old politics-culture-news weekly, whose former editors-in-chief included the current UK Prime Minister, is launching a monthly print edition in the US following a digital launch there in 2018. The October debut follows the 2008 magazine launch in Australia.
The Spectator (76k circulation) is said to be the world’s oldest English-language magazine. In 2018, it made a pre-tax profit of £1.4m on revenue of £13m. The magazine is owned by the Barclay family, owners also of the Telegraph Media Group. But The Spectator is operated separately from the Telegraph. So, perhaps, they might sell for a premium price. Could The Spectator fit into the New York Times’ international strategy?
B2C. US-based Automattic Inc (owner of WordPress) is buying Tumblr from Verizon for a nominal price. The blogging and social networking site was established in 2007 by David Karp who sold it to Yahoo for $1.1bn in 2013. Terms of this latest deal were not disclosed but the price is reportedly less than $3m, a stunning fraction of the company’s former value. Verizon acquired Tumblr in 2017 as part of Yahoo and started to look for a buyer early in 2019.
The previously high-rated company has been marginalised by competition from Facebook and other social media and sharing services. Automattic will take on the 200 staff of Tumblr which allows users to upload blogs, photos and music. It’s a major acquisition for the San Francisco-based Automattic whose online brands include Longreads, Akismet and Gravatar.
Verizon is revamping its media operations after struggling to meet revenue targets. It currently owns Yahoo and AOL web properties such as HuffPost, TechCrunch, feminist media brand Makers and celebrity-interview site Build. It says it wants to focus on subscription services and original content. There remains persistent speculation about whether the prominent but perennially unprofitable Huffington Post will also be sold. Presumably some traditional news brands would be interested…and, of course, Bustle.
B2B. American City Business Journals (ACBJ) has bought a majority stake in BizEquity, a cloud-based valuation service for 625 institutional clients and 2,500 wealth advisers: “We have created the first patented online service to help the over 200m global businesses around the world know what they are worth.”
The 34-year-old ACBJ is the largest publisher of metropolitan business weeklies in the United States, with 43 publications reaching more than 3.6m readers. It also publishes magazines on sports and classic cars. The company is owned by the Newhouse family-owned Advance Publications (owner also of Condé Nast) which acquired it in 1995.
Sound + Vision. LDC, the private equity arm of Lloyds Banking Group, of the UK, has taken a minority stake in the natural history film maker Plimsoll Productions, valuing the company at £80m. Plimsoll has produced over 50 series, 14 live shows and seven films since it was founded in 2013. The company received an Emmy nomination for Hostile Planet which featured adventurer Bear Grylls on the National Geographic channel. Other series include Life at the Extreme and Rescue Dog to Super Dog.
The Bristol, UK-based Plimsoll distributes to more than 50 countries worldwide through Magnify Media, a company in which it invested three years ago. Its content is broadcast in more than 70 countries. Last year, the company made operating profit of £2.3m from £19.5m revenue – almost 50% ahead of the previous year. In the current year ending this month, it is believed that Plimsoll will have revenue of more than £30m. Its broadcast customers include the BBC, Channel 4, Channel 5, Blue Ant Media and National Geographic.
Natural history programming exports relatively well because the voice-over format is easier to dub into different languages for local markets.
Events. Phoenix Equity-backed Nineteen Group, of the UK, has acquired Broden Media, owner of the 13-year-old Emergency Services Show. The two-day show, which takes place next month, is said to have attracted more than 450 exhibitors and 8,000 visitors last year to the National Exhibition Centre (NEC), in Birmingham. The deal also includes the magazine Emergency Services Times.
In November last year, the 20-year-old Nineteen Group acquired the Sussex-based Western Business Exhibitions, organiser of UK-based events, including: The Health & Safety event (NEC), Health & Safety North (Bolton Arena), Scotland Works (SECC, Glasgow), and The Security Event (NEC). The deal coincided with the Phoenix investment.
Nineteen already organises the International Security Expo and the International Disaster Response Expo which together are claimed to attract more than 350 exhibitors and 12,500 international decision-makers from government and the private sector.
Insiders speculate that Nineteen and its private equity investors contemplate a future sale to the voracious Clarion Events which operates the market-leading Defence & Security Event International (DSEI), attended by more than 30,000 people annually at London’s Excel. The Blackstone-owned Clarion (the world’s fourth largest exhibition organiser) has no fewer than 25 defence and security events in 10 countries attracting 3,000 exhibitors and 120,000 visitors.
News. The largest newspaper publishers in the US and UK, like their counterparts everywhere, are wrestling with sharp declines in revenue and readership. In the UK, the £265m Reach Plc (formerly known as Trinity Mirror) has been playing the role of newsprint consolidator by spending £350m acquiring the Local World regional newspapers (once largely owned by the Daily Mail Group) and the Express & Star national newspapers, formerly owned by Richard Desmond. It has national and regional news brands across the UK, including the Daily Mirror, Sunday People, Daily Express, Daily Star, Daily Record, Sunday Mail, leading papers in key metropolitan markets, and celebrity magazines OK! and New!.
In the US, New Media Investment Group, a holding company that controls GateHouse Media has agreed to pay $1.4bn for the country’s largest newspaper group Gannett, the owner of USA Today and more than 100 other publications nationwide – and also Newsquest, the UK’s most successful regionals group. In combination, GateHouse and Gannett would publish more than 260 daily newspapers in the United States, along with more than 300 weeklies. Instead of applauding the deal, investors are said by the New York Post to have “sent shares of New Media plummeting in a sell-off that has lasted three days. The now sagging New Media shares will be used as currency to pay Gannett shareholders for selling the company. They could vote the deal down if they feel they aren’t being properly compensated.” The deal is hanging by a thread.
The US saga was playing out just as, across the Atlantic, Reach CEO Simon Fox was preparing to announce better-than-expected half-year results that led one analyst to say it was “the stand-out value play” of all listed UK media companies. But, just days before the announcement, the engaging Fox had been summoned by his chairman to be told that the board wanted his immediate resignation and that they had already chosen his successor. Enter Jim Mullen, the former CEO of betting group Ladbrokes Coral.
Everything about the abrupt change seemed awkward, not least the chairman’s admission that “Reach in very good health, with a strong balance sheet and real progress in developing the business for the future”. Even the announcement purported to “confirm” that the CEO was leaving even though it had been a complete surprise to almost everyone including Fox himself. Mullen, whose decade-ago digital roles in News Corp UK were played up by his new boss, wasted no time in declaring his mission “to build upon its digital transformation”.
And that was the point.
Former retailer Simon Fox had spent seven years paying down debt and growing margins at a company with a history of management mayhem dating back to even before the late Robert Maxwell plundered its pension fund in the 1990s. Fox’s board colleagues (including people from Facebook and Amazon) had engaged him in regular debates about digital futures but, back in his office, he remained preoccupied with squeezing profits from print. Even as his board was secretly finalising the arrangements for his successor, the CEO was openly discussing a possible merger with the distressed newspapers of the former Johnston Press. He was also wondering whether the proposed GateHouse acquisition of Gannett would prompt the sell-off of Newsquest newspapers in the UK. More print!
He had succeeded in trebling his company’s share price. Both the Local World and Express & Star acquisitions will have paid back the investment in less than four years. The company has been doing much better than its industry and has mostly satisfied its nervous investors.
For January-June 2019, this publisher of almost 150 UK newspapers made operating profit of £69.9m from £352.6m of revenue. The real story is in the detail because operating profit was 7% up, even though revenue was slightly down, profit margin was a seemingly solid 20%, and the shareholders’ dividend was 5.5% up on the previous year. The company delivered acquisition synergies of £6m (£15m for the full year and £22m forecast for 2020). Not bad for a profitable acquisition which will have cost a maximum of £127m.
The outgoing CEO almost choked as he said: “We have delivered a positive financial performance in what remains a difficult trading environment for the industry, in particular the regional businesses. The benefit of improved performance from national print advertising coupled with further cost mitigation will support profits over the year despite a further increase in newsprint prices for the second half. We have started the process of integrating Express & Star in order to accelerate the benefits that our combined scale will deliver and have a clear strategy which fully reflects the changing shape of the group.”
The trouble is that Reach has been wringing every last pound of profit from its fading news brands. The flagship national newspaper brands, the Daily Mirror and Daily Express, which (decades ago) each had market-leading circulations of some 5million copies daily, have suffered worse than most. In just the past five years, Mirror copy sales have fallen by some 80% to just 480k, and the Express by 70% to just 300k.
What are among the UK market’s worst circulation performances may be attributed to the fact that their tabloid audiences are the ones that have most readily turned away from print. But they may also be suffering from the salami cost cutting that is producing short-term profit gains even in the face of revenue decline.
Reach has quite simply been generating more cash than investors could ever have expected from its legendary newspapers – by doing so little for the future.
Simon Fox is not alone among newspaper owners in trying not to compete with his own print media for fear of accelerating the decline. But, arguably, he has believed just a bit too strongly that:
- Readers won’t pay for digital content
- News media can be competitive for advertising
- Print has a long way still to go
The reality is that newspaper publishers must get real and either win advertising support by guaranteeing large, free or low-cost readership; or get readers to pay for the content. Not both. That’s easier said than done for traditional media that has grown fat from being able to generate substantial revenues both from readers and advertisers. But newspaper publishers need to re-engineer the print business model and build new-style digital services.
That means identifying what (separately) readers and advertisers will pay for. Many UK dailies have made a start, even if only to produce decent digital editions and/or convert casual sales to posted subscriptions. Reach hasn’t even done that.
You could satirise the Reach strategy by reference to what one of its dailies told readers: “The days are long gone when we could afford to be a paper of record and dutifully report everything that happened on our patch”.
By the outgoing CEO’s own account, Reach has no confidence in the willingness of readers to pay for content. But he has been ignoring the stark reality that a full 50% of his own revenue still comes from circulation, most as casual retail sales. So, the publisher needs either to ensure it can maintain these copy sales or – somehow – prepare for life without them. Perhaps it is Reach’s fatalism that gives it the pride for being not just the UK’s largest publisher of newspapers but also also its largest printer, with six factories employing a full 14% of Reach’s entire workforce.
It’s no surprise that genuine innovation is thin on the ground. The 2016 launch of New Day, aimed dreamily at people who had “fallen out of love” with newspapers, was shocking. The embarrassingly low-cost, ill-conceived tabloid lasted just two months. The MyLondon news aggregator is equally feeble. And the cutting back of short-run stand-alone digital initiatives long ago revealed the company’s limited appetite for innovation.
While Reach’s digital-native, non-executive directors have their own ideas of what can be achieved by a public company whose demanding investors are not going away, the strategy of wringing the maximum amount of profit from the portfolio must change. Its total print and digital audience of 48.5m (76% digital) speaks volumes for the growth opportunities.
Jim Mullen will hit the ground running when he takes over from Simon Fox next week. His action plan may include the following:
- Forget the idea of merging with Johnston Press. Reach has got enough print, especially among stricken regionals
- Develop stand-alone digital products and services which can use Reach content and be promoted via its newspapers – but would be managed separately
- Build paid-for digital newsletters, apps and websites for exclusive newspaper content, including columnists and special interests
- Find partners which can gradually free Reach from the burden of operating its own printing plants
- Build partnerships to create new business for the Mirror, Record, and Express including co-branded products and services in retail, broadcasting, and leisure
As someone who has earned a living from an industry which has taken betting from little high street shops to huge online sites, the new CEO of Reach Plc may be confident about the prospects of turning his national and regional news brands into viable digital media. But he will realise just how the long-gone advertising boom dislocated newspapers’ relationships with their readers. Mullen must hope that investors who so recently cheered his predecessor will now accept that a real strategy for the future depends on innovation – and investment.
Magazines. Dennis Publishing, of the UK, whose auto portfolio includes Auto Express, Evo, and Car Buyer, has acquired social media company Car Throttle and its motorsport brand WTF1 which operate from London and New York.
Car Throttle was started in 2009 after founder Adnan Ebrahim (then an economics student at London University) realised there was no online platform for people like him: young, millennial car enthusiasts. Dubbed ‘Buzzfeed for cars’, the site quickly evolved into a vibrant community serving millions of users – called CTzens – who follow the brand on apps and social media. It now claims 14m followers and its videos have been viewed 2.5bn times on YouTube. WTF1 has an audience of over 1m followers including F1 drivers and fans.
Ebrahim’s social journalism model gets 99% of its content from users and only 1% from its internal editorial team. He’s been quoted as describing Car Throttle as “Top Gear for the Facebook generation” which might just rile the former Top Gear presenters who launched DriveTribe.
Terms of the deal were not disclosed but Car Throttle’s UK and European funders (including Passion Capital, Vitruvian, and Redalpine) invested some £1.5m in the business during 2013-15. It had an estimated £3m revenue last year and is said to be profitable. It makes money from branded content, video, ads – and e-commerce.
In December 2017, Digiday reported that e-commerce accounted for some 40% of Car Throttle’s total revenue, from more than 3,000 products including hats, T-shirts, keychains and pricier items like steering wheels and hydraulic handbrakes. “There’s no reason why we can’t challenge the eBays of the world to become the go-to place for petrolheads,” said Ebrahim. “Media companies have more of a competitive advantage than they think. They understand the mind of the user; they just need to shift from thinking about how they view media to buying stuff. Publishers often miss that their audiences are also buyers.”
Adnan Ebrahim will continue to manage Car Throttle, as part of Dennis.
The acquisition is a measure of Dennis’ commitment to the broad motoring market in which its Buy-a-Car e-commerce has been expanding fast, despite growing UK competition. Last year, Buy-a-Car was believed to have some £60m revenue – almost double the previous year and 50% of Dennis’ entire UK business.
The £190m-revenue company, publisher of The Week in the UK and US, was founded in 1974 by the late Felix Dennis. It was sold to Exponent private equity for £170m last year. Earlier this year, it acquired the Kiplinger newsletter business and also the subscription lists of Money magazine from Meredith as part of its expansion of The Week in the US.
Music. Tencent of China, internet and tech giant, is to acquire a ten per cent stake in Universal Music as the company expands its reach within the global music industry. Vivendi, owner of Universal Music, announced the discussions. The deal values the music company at €30bn and the deal would give Tencent an option to double its stake within a year on the same terms. It reflects renewed interest in the music sector after declining sales and increasing piracy, and indicates Tencent’s desire to create commercial access to the Chinese music space where tastes are local and piracy is rampant.
Vivendi also announced it is to explore other areas of potential cooperation with Tencent including the ‘opening of new markets’. The deal indicates a move by Tencent towards content acquisition rather than technology. The company already backs music services in a number of international markets. Universal Music publishes music from artists ranging between The Beatles to Taylor Swift. The recent success of Billie Eilish, Ariana Grande and the soundtrack to A Star Is Born have boosted results with first half results rising tp €3.3bn of revenue and €481m EBITDA. Universal accounts for 67% of Vivendi’s profit.
Sound + Vision. Rupert Murdoch’s “new” Fox Corp (formed from Fox News and Fox Sports spun-out of the former 21st Century Fox before its sale to Disney) has made two acquisitions with the purchase of a 67% stake in Credible Labs for $265m and the acquisition of Bento Box Entertainment, maker of the Bob’s Burgers cartoon. Bento Box Entertainment produces the cartoon which is aired on Fox as well as other quality animation series for distribution via YouTube and Netflix.
In a more diverse deal, Fox has also invested in the Australia-listed but San Francisco-based Credible Labs Inc which provides a marketplace for consumer lending, providing information on loans for housing and education from lenders to consumers. “The acquisition of Credible underscores Fox Corp’s innovative digital strategy that emphasizes direct interactions with our consumers to provide services they want and expand their engagement with us across platforms,” said Lachlan Murdoch, CEO of Fox. Credible founder and CEO Stephen Dash will stay with the company.
Events. James Murdoch’s new investment vehicle, Lupa Systems is leading a consortium who have agreed to buy a majority stake in the NY based Tribeca Film Festival, founded by Robert de Niro and owned by Madison Square Garden Company and other investors. Financial terms of the transaction were not disclosed. The company was valued at $45m in 2014 when Madison Square bought its 50% stake.
Lupa will be aiming to expand the business which was initiated in the wake of 9/11 and has attracted 5m attendees. “When Tribeca was founded after 9/11, they brought together a tremendous creative community to embark on a mission-drive business with civic impact,” Murdoch said, before vowing to “grow that mission”.
B2B. CyberRisk Alliance (CRA) a B2B information company based in the US, has acquired digital media and events company SC Media from the UK-owned Haymarket Media Inc. CRA serves the cybersecurity and risk market and the acquisition boost their position in this fast growing market sector. SC Media has been established for 30 years operating respected events, digital and print information to the cybersecurity marketplace with over 80,000 members.
CRA was established in November 2018, is growing through acquisition to grow its portfolio into a leading B2B information source within its niche. Haymarket will continue to run the SC Media business in the UK in conjunction with CRA.
Books. Elsevier, science and health publisher (and part of RELX), has completed a deal to sell its Portuguese book portfolio to Grupo Editorial Nacional (GEN). The portfolio includes over 1,000 book titles. The translation of other Elsevier titles into Portuguese and their distribution has also been licensed to GEN. GEN has been established for twelve years and this represents its twelfth acquisition, enabling the company to become a leading science and technology publisher in Brazil. Elsevier will focus only on digital markets in Latin America.
Sound + Vision. Entercom, US audio company and owner of digital audio app RADIO.COM has acquired Pineapple Street Media, producer of quality podcast content, and has announced its intention to acquire Cadence 13 a podcast creation and distribution company.
Entercom claims to reach an audience of 170m through its local radio, digital and events brands. The two deals totalled $70m with £$18m going to the owners of Pineapple Street Media and the remainder for Cadence 13 in two tranches as the company bought a 45% stake in 2017. “Radio is going through a renaissance,” said Entercom Chief Executive David Field, with podcast advertising revenue climbing 53% to almost $500m in 2018 and expected to double to $1bn by 2021.
All Media. Moonbug, global children’s entertainment company, has acquired South African video and comic brand Supa Strikas. Moonbug is based in London and Los Angeles, with a strategy of developing age appropriate content for children. Supa Strikas taps into the global audience for football with a diverse range of characters. The brand is produced in 27 languages across 100 countries. Along with digital it is broadcast by Disney, Nickleodeon and Turner.
The brand started in 2009 and has a large circulation monthly comic, claiming 1.5m subscribers across all channels. . “While the brand began as an admired comic book, we see our future in digital which is why Moonbug is the perfect home for Supa Strikas,” said Richard Morgan-Greenville, co-founder of Supa Strikas. “Moonbug understands the significance of the property’s global track record and we look forward to marrying the brilliance of the show with the world’s passion and demand for all things soccer.” Terms of the transaction were not disclosed.
B2C. Singapore’s used car marketplace company, Carro, has acquired Jualo.com of Indonesia. Whilst Carro operates as a car marketplace, Jualo covers new and used goods across a range of categories including cars and motorbikes but also property and fashion. The deal comes alongside Carro’s new $90m series B fundraising round. The start-up, established in 2016, has now raised $100m from investors, with deal volumes via its site increasing from $120m in 2016 to $500m in 2018 and expansion into car insurance and roadside assistance. Jualo has over 4m monthly users and enabled over $1bn of transactions in 2018; the company will continue to operate under the Jualo brand.
News. Avant Publications, based in Pennsylvania, has acquired the state’s Times Leader Media Group from Civitas Media which is itself owned by PE Versa Capital Management. Avant is owned by newspaper executives including Scott Champion whose own Champion Media owns dailies and weeklies in the Carolinas, Virginia and Ohio.
All media. Future Plc, the UK-based tech and special interest publisher is acquiring SmartBrief, the privately-owned US based B2B digital publisher for an initial sum of $45m and a 2020 performance payment of up to $20m. The price is 9x EBITDA of $5m in the year ended 31 March 2019, when SmartBrief revenue was $35.1m.
The 20-year-old company publishes more than 250 daily and weekly email newsletters distributed free to 5.8m “subscribers” in B2B verticals including education, finance, healthcare, advertising, travel, and retail. The company was co-founded by CEO Rick Stamberger, a former hedge fund manager who was also an assistant to former US Vice President George H.W. Bush, and then President-elect Obama.
The newsletters are published in partnership with some 150 trade associations and professional societies which give SmartBrief access to their membership lists in return for commission, believed to be in the range of 10-25% of advertising revenue for each newsletter.
Future CEO Zillah Byng-Thorne told investment analysts this week that the acquisition was in line with the strategy of building a global platform for media, and diversifying revenue sources under-pinned by proprietary technology: “This acquisition will substantially boost our presence and market position in the B2B sector and enhance our proprietary technology capabilities.” SmartBrief’s tech facilitated the automated curation of content from a thousand different sources and automated RoI reporting based on open rates and click throughs.
The deal sent Future shares climbing again on the London stock exchange where its market cap has multiplied five times in 18 months. This week, it almost reached the magic £1bn – for the first time since 2000. Back then, the magazine company (founded by TED leader Chris Anderson) had IPOd in 1999 at £500k and was riding the crest of video games and the first tech boom. But, within a year, it had collapsed, suffering variously from investor hype, executive hubris, shaky systems and bad luck.
The profit warnings and lay-offs have been consigned to history by Byng-Thorne’s sparkling five years, during which revenue has increased from £60m in 2015 to an expected £205m this year. The market cap has jumped to more than £950m from a mere £30m. Some 70% of last year’s revenue came from digital advertising, events and e-commerce across games, music, home interest, and hobbies. The rest came from the still substantial print portfolio: 80 magazines and 500 bookazines totalling 1.2m circulation. Key digital, print and event brands include: TechRadar, PC Gamer, Tom’s Guide, Homebuilding & Renovating Show, GamesRadar, The Photography Show, Music Week, Top Ten Reviews, Live Science, Guitar World, Total Film, MusicRadar, and Tom’s Hardware.
The CEO’s track record of solid dependability and out-performance helped investors to cheer the SmartBrief acquisition, even though few had expected that Future would expand so strongly into B2B.
There have been no tough questions about why SmartBrief has been growing more slowly than its newer, direct competitor Industry Dive, a near neighbour in Washington DC. In 2019, the seven-year-old rival is expected to match the c$30m revenue achieved by SmartBrief in its 20 years – and with 25% profit margins compared with SmartBrief’s 14%. That may be the price of the trade association deals which provide the short-cut to building an audience.
Future is believed to have been introduced to SmartBrief at an April 2019 conference organised by the US company’s adviser. The technology and skills will be used to turbocharge newsletters in Future B2C markets, notably the market-leading TechRadar site whose current emails are said to be “very small and manually produced”. In practice, that seems less obvious than launching SmartBrief itself in the UK where (unlike the US) there may be less direct competition. But Future’s core is specialist consumer media…
There is no doubt that newsletters are fast becoming major media channels in their own right, rather than just promotional tools for newspapers and magazines – for business as well as consumer audiences. But does that justify Future’s diversification into B2B? Is SmartBrief’s technology reason enough for the move into a “new” world of B2B content, audiences and advertisers?
Over the past few years, Future has capitalised on low UK interest rates, a powering share price and its scaleable systems to produce great returns from successive acquisitions. But last year’s $13.8m purchase of New Bay Media, of New York, may have been the first time Future had declared a strategic interest in B2B media. Even then, it was acquiring broadcasting, music and games media to complement its B2C portfolio. Now, the company (some 65% of whose revenue will come from the US) has gone full tilt into B2B, which may soon account for 20% of all revenue.
No one should bet against Zillah Byng-Thorne who has energetically led the transformation of Future Plc. She’s one of the UK’s brightest young CEOs who’s as good with people as with strategy, systems and numbers. Indeed, the only real concern of Future investors is that she will be tempted away by a larger corporate challenge. We just hope her assertion to analysts that SmartBrief boss Rick Stamberger was “probably in his late 40s” (he celebrates his 60th birthday next month) is not a slip that betrays the speed of this latest deal and its strategic rationale.
B2B. Procurement Leaders (PL), the integrated B2B group serving the global community of corporate purchasing bosses, has been sold to the private equity-owned World 50 Inc., a peer-to-peer network which claims more than 900 members from 500 companies worldwide. The Atlanta-based company operates communities of CEOs and other executive functions.
This looks like a smart combination of two companies which provide knowledge-sharing and a sense of community to worldwide members.
Although the price has not been disclosed, it is believed World 50 (which, like PL, was launched in 2004) has paid some £30-40m for the London-based company which will continue to be managed by Nandini Basuthakur who became CEO in 2017.
It was founded by Alex Martinez, Mark Perera and Richard Pope as “a global membership network serving major corporations and procurement, sourcing and supply chain executives.” It provides independent intelligence, professional development and peer-to-peer networking through online, events, publishing and training. It has an international client base of some 750 leading companies with 33,000 members.
PL employs some 120 people (50% in membership functions) spread across offices in the UK, US, Australia, and India – and had revenue of £12.3m in 2017. It exploits the rising importance of procurement in international companies which now realise that these functions can be the key to strategic supplier relationships, production security, reputation, and risk management.
The company was formed to create a global community from the purchasing executives who were were often the unsung heroes of companies, seen as the difficult people who pared down budgets and struck fear into the hearts of visiting sales people. But all their hard work found its way straight to the bottom line.
The founders (none of whom had previous experience either in media or purchasing) set out to extract and centralise the knowledge from among the best minds in procurement and share the insights with a wider group via the whole range of platforms. They quickly discovered how readily even highly-competitive companies would share information in order to get something valuable (other people’s data) in return. The strength of Procurement Leaders, 60% of whose revenue is membership subscriptions (39% is events), is its database – intellectual property provided (and constantly updated) by the membership itself.
One long-time member this week paid tribute to the company’s founders: “PL has had a major influence on procurement, bringing together firms to learn and network in a very positive manner, and sprinkling a bit of stardust on our sometimes rather dull procurement world! I hear some solution providers complain about the amount they’re charged for participation, but the fact is they pay up, which is down to the strength of the practitioner-side network PL has developed, with an unparalleled list of big corporates as members.”
But, for all its inventiveness and campaigning on behalf its members, PL’s financial performance has been erratic, with EBITDA bouncing around either side of £1m for the past four years and margins of 7-16%: hardly the stuff of a go-go digital business. Part of the explanation lies in the company’s rising costs. Opening offices around the world has been one drag on profit growth. But, during 2014-17, the 62% revenue growth was all but swallowed up by a similar increase in headcount. Then there’s the familiar erratic performance in conference-awards event revenues, especially from sponsorship. But the real story has been the relatively high subscription churn rate as the company has had to run fast to stand still.
A sign of the expansion potential, after years of bumpy financials, is the geographical profile of revenues which – in 2017 – were 37% from the UK, 28% each from the US and Europe/Middle East/Africa, and 7% from AsiaPacific. The US and AsiaPacific were the fastest growing.
While total revenue was up by 8% to £12.3m, adjusted EBITDA actually dropped by 18% to £938k. But this reflected a strategy to increase membership revenues by adopting corporate enterprise licenses instead of a seat-based license model. This has resulted in 35% growth in the average value of annual membership contracts. This almost certainly produced strong profit growth in 2018.
There will have been times when the founders of Procurement Leaders might have expected a higher price for their company. In 2015, when PL achieved EBITDA of £1.5 on revenue of £9.5m (at peak 16% margins and with cash deposits of £3.4m), they might have expected profits of £4m by now, rather than struggling to reach £2m. But the appointment of an independent CEO almost two years ago, with the founders stepping back from their executive roles, was inspired.
Nandini Basuthakur has revitalised and re-engineered the company. That and a relatively long courtship/ negotiation with the uniquely suitable World 50 buyer helped the PL founders to get a good price after all for their built-to-last business. A great result all round.
B2B. The UK-based global defence information service Jane’s has been put up for sale by IHS Markit. The business, formerly known as Jane’s Information Group, is believed to have revenues of £50-60m derived mainly from database subscriptions and consulting, although the company may still be best known for Jane’s Defence Weekly and the Jane’s Fighting Ships annual analysis of the world’s 165 navies.
Jane’s was founded 121 years ago by Fred Jane who had begun sketching ships as an enthusiast naval artist while living in the UK port of Portsmouth. His hobby developed into the 1898 publication of “All The World’s Fighting Ships” before diversifying into other military books and magazines. Jane was reputedly also involved in pre-war British intelligence services.
In 2007, Jane’s Information Group was acquired by IHS Inc from the Thomson Corporation, of Canada. It paid $183m to bring together the two companies as “global operators with long-standing customer relationships in aerospace, defense and government.”
That was before the 2016 merger which created the IHS Markit data-tech group with revenues of $4bn and EBITDA of $1.6bn.
What the company describes as its Aerospace, Defence & Security division has seen growth, including through Jane’s Military & Security Assessment Intelligence Centre and Jane’s Terrorism & Insurgency Centre. But it is an insignificant part of the $25bn IHS Markit which is dominated by energy, automotive, and financial services.
At a time of increasing global spending on defence and security intelligence, Jane’s might be expected to be acquired by private equity.
Broadcast. Whether or not the sun has set on Rupert Murdoch’s astonishing career as a global media pioneer depends on your view of the man who still controls the $8bn News Corp , the $23bn “new” Fox Corp (including Fox News and Fox Sports) and the largest private shareholding in the world’s leading media group Walt Disney Company, to which he sold most of 21st Century Fox in 2018.
His greatest business achievements so far are a long list that includes:
- A major Australian media group created from the single Adelaide newspaper he inherited from his father at age 21
- The Sun, the salacious tabloid which has been the UK’s most profitable newspaper across 50 years
- Sky TV, the world’s most successful pay TV group, launched 30 years ago as a “pirate” satellite channel
- The money-spinning Fox TV, launched in 1986 as an unlikely challenger to the big three US TV networks
- The revival of 20th Century Fox, producer of bestselling movies including Avatar, Star Wars and Titanic.
The list could also include: Murdoch’s defeat of the UK print unions in the 1980s adoption by his newspapers of computer typesetting, the launch of Australia’s first national daily newspaper, the formation of Harper Collins book publishing, and his burgeoning digital property sites across the US and AsiaPacific. In a swashbuckling six decades, the one-time socialist (yes) has turned a few thousand dollars of inheritance into a media fortune of more than $20bn.
The characteristic common to those achievements and to many other deals (like his profligate $3bn acquisition of the US TV Guide 30 years ago) is that any or all might have bankrupted his company; they were big bets. Even decades after his 1970s success with UK newspapers from a standing start, industry insiders across the world would have bet against his TV launches in the UK, Europe and the US.
Beyond the political muscling, schmoozing, phone hacking, and legal shenanigans, Rupert Murdoch has spent years making media investments few others would have contemplated – and winning time and again. You don’t have to like him but he has been a committed supporter of journalism: his best-known newspapers – The London Times, The Australian, and the New York Post – have almost never been profitable.
That is well known, of course. But few people outside India would recognise the stand-out Murdoch achievement omitted from my list. It is Star TV, which he acquired in 1993 for $870m when it reached a mere 200m people. By the time it was acquired by Disney as part of the Fox sell-off last year, the audience was 836m in India and more than 100 other countries.
With revenue of more than $2bn, Star India is one of India’s three largest media firms. Its 60 channels have been contributing 7% of all Fox revenues and are still growing strongly. In the 27 years since Murdoch plunged into India, the country’s media and entertainment industry has grown from $500m to $24bn. But the Star success is almost secret.
You would be hard pressed to find even a mention of Star TV in the coverage of Disney’s acquisition of Fox, even by Murdoch’s own newspapers. And the Disney acquisition presentations to investors managed to gloss over the broadcaster that is now Disney’s largest outside the US, expected to generate $2.5bn of revenues in 2019. Flick through CEO Bob Iger’s deck and you might just catch sight of the Star logo.
If we can be surprised at Star TV in India, that surprise has been shared over the past quarter-century by legions of Murdoch insiders. He knew almost nothing about India when some of his executives regaled an awayday meeting years before with forecasts of the impending growth of the Asian economies. Almost on cue, Goldman Sachs came calling on behalf of Hong Kong tycoon Richard Li who had started Star in South East Asia and moved cautiously into India. Murdoch grabbed the challenge and never let go.
The story of how he (and, crucially, his son James) built the Star India powerhouse is told in a new book* by the country’s best writer on media, Vanita Kohli-Khandekar. Her eyewitness account goes in deep to illustrate how the world’s most successful media entrepreneur does it. There’s his grasp of the big issues, of course, but also his focus on the detail of what game-show cash prizes work best – which turbocharged a whole Star channel. The restless, hard-driving boss gets a flip-side with stories of his patient learning about the myriad of Indian local languages and allegiances, customs and appetites of a population so different from the English-speaking countries he knew best. But there’s always his determination to hold his nerve, adapt and win through even when external factors (like the 1990s Asian financial crisis) threatened to wreck the strategy.
In words that speak volumes about the Murdoch strategy, Bruce Churchill, the longtime Star deputy CEO, says: “News Corp is not originally an American company and that is a big difference. A lot of American companies look at the international markets as a sales opportunity. News Corp started in Australia, then built a successful business in the UK and then went to the US. So, we knew we could build an international business by going and building local stuff, we didn’t take the Australian papers to the UK.”
Uday Shankar, the political newspaper journalist-turned CEO, who worked closely with James Murdoch to create the Star India media miracle, says: “The Murdochs bet, take risks and don’t give a damn what the market thinks. Rupert has a lot of charisma, and managers want to go into battle for him. That’s not surprising given how far ahead he thinks and how much he backs his people. People don’t realise what a federal structure we (Fox) work in. If I take a concept to New York, it is because I am not sure or because I need money. Working with the Murdochs has spoilt me. The amount of ownership and freedom I have here is tremendous.” (Shankar is now head of Disney for AsiaPacific and Chair of Disney India).
Those pre-Disney quotes are an epitaph to the golden days of News Corp/Fox. I wish I could re-print this whole story about the world’s first (and last?) multi-media emperor. The sharp-eyed Vanita Kohli-Khandekar interviewed 100 people for this great story of how Murdoch made it in India. It’s a secret no more. You should read it.
B2C. Vice Media, the owner of media brands including Vice, Noisey, Motherboard and i-D, is in talks to acquire women’s digital publisher Refinery29, but no definite agreement has yet been reached.
Refinery29 claims to reach 425m readers globally and has been backed by companies such as WPP, Hearst, and Discovery. However, after revenues failed to meet expectations in 2018, the company cut 10% of its staff.
Founded by Shane Smith in Canada 25 years ago as an edgy print magazine, Vice became the hottest digital media of the past decade and gained investments totalling some $1bn from Fox, Disney, WPP, and TPG as its digital growth soared. However, like Refinery, it also began to miss its revenue targets, due to declining traffic and poor performance from its Viceland TV channel. This year, Vice’s new CEO, Nancy Dubuc cut 250 jobs, HBO cancelled its two shows, and Disney wrote off its $350m investment. Like Refinery29, Vice has been trying to diversify its revenue streams, through TV streaming and production and its Virtue, marketing agency.
In some ways, the two companies are complementary. But the two cultures may simply not fit. Refinery29’s audience is about as girly as Vice’s is bro-y. It is estimated that Vice has revenue of $600m and an audience 60% outside the US, while Refinery29 has revenue of some $100m, predominantly from within the US. Don’t bet on it.
Events. The private equity-owned Closer Still Media, the organiser of eCommerce Expo in the UK and in Asia, has acquired two further eCommerce shows in Spain from EWorld. The events are based in Madrid (next in October) and Barcelona. The 1-2-1 eForum events held biannually were also acquired. Terms were not disclosed.
Closer Still’s complementary events across Europe and Asia attract 75,000 attendees annually. The 11-year-old company, which also operates in the veterinary, data and medical markets internationally and was founded in the UK by Phil Soar, was acquired in 2018 by Providence Equity Partners, reportedly for £340m.
Events. Malo Events, of the UK, is acquiring the Digital Kids Show from Engage Media Solutions, of Manchester, UK. The show complements Malo’s existing portfolio including Kidtropolis, Comic Con Ireland and Summer in the City. Since 2016, the Digital Kids Show and Kidtropolis have been operating jointly in London, Birmingham and Manchester, and the events will now rebrand as Kidtropolis. The owner of Malo is Brian Cooney, co-founder of the UK and Europe-wide MCM Comic events which he sold to Reed Exhibitions in 2017. Kidtropolis was founded in 2016 by Aisha Tilstone to showcase digital leisure to a family audience.
News. Most daily newspapers (with the notable exception of the New York Times) just can’t bring themselves to unbundle their digital content, even though the warnings are getting louder. The UK’s quality national daily newspapers have chosen not to recognise that their digital services under-value a wide range of their best journalism by bundling it with content that millennials and others just don’t want and won’t pay for – just because that’s what newspapers have always done. By supposedly defending their print traditions, newspapers are eschewing the opportunity to build a sustainable digital future. And the challengers keep coming.
First, came the well-funded Tortoise, launched by former executives of the BBC and News Corp, seeking to provide only the kind of op-ed pages which The Times, Daily Telegraph and The Guardian do so well. It’s work in progress.
Now, the even better-funded, three-year-old sports subscription publisher The Athletic is launching its first operation outside North America. It’s preparing to challenge the established coverage of the UK’s richest sport, the English Premier League (EPL) football-soccer.
The scale of the EPL is best illustrated by the fact that its 20 clubs each receive more than £100m per season, just from TV broadcasters. It helps them attract many of the world’s best footballers which, in turn, builds the growing popularity of the EPL in the UK and around the world – and brings in even more cash.
The EPL is also a staple of the whole range of UK national dailies whose match-report supplements produce copy sales spikes during the nine-month football season.
The Athletic’s plans have been widely known for a few months but UK publishers have been shaken by how the US company has signed up a team of more than 50 journalists including star names and also established regional reporters who know everything that happens at their local EPL clubs. It’s believed to have poached The Times chief football editor Oliver Kay, its sports editor Alex Kay-Jelski, The Independent’s Ed Malyon, and the BBC’s David Ornstein. Everybody is expecting more star signings in the two weeks before the football season begins. BuzzFeed reported: “The Athletic…have been super-aggressive … they have gutted The Times. It’s the biggest shake-up in sports journalism since the digital era. There has probably been more movement in the last four months than in the last 15 years.”
Many of the journalists are said to have been recruited at double their existing salaries and it is clear that, as well as providing a wide range of football coverage in text, video and audio, The Athletic will provide deep club-by-club content beyond anything (so far) done by daily newspapers in print or online.
The Athletic was launched in Chicago in 2016 by Alex Mather and Adam Hansmann, former employees of Strava, the California-based subscription-based fitness company and social network for athletes. They left to produce “smarter coverage and high-quality journalism for die-hard fans,” as an alternative to the traditional, advertising-supported business models. In the US and Canada, they now have 400 full-time writers, who each own shares in the business.
North American subscribers are claimed to be in “the low hundreds of thousands” with an annual “churn” of less than 10%. They pay $9.99 per month or $50 per year. UK subscriptions are expected to be similarly priced, i.e. about £8 per month and £40 per year. That is actually the full annual price of the UK Daily Telegraph’s digital “sports subscription” (launched quietly two months ago) so the impending UK competition has their full attention.
The Athletic is riding the wave of subscriptions media at a time when so many free, ads-funded services (including BuzzFeed, Vice, and HuffPost) have been cutting back. It raised $40m last year, valuing the company at $200m. It is estimated that the 55-strong UK team could cost an annual £4m. That equates to some 100k subscriptions, which seems achievable enough in a market where even weak tabloids are selling several times that, as much for football content as anything else.
Nobody is missing the point that the English Premier League has a huge global market through live TV coverage, international competitions, team tours, and merchandise sales. So, The Athletic’s first foray outside North America will help it move quickly into other international markets. The EPL will be the internationally-transferable content that pushes The Athletic towards the Spotify or Netflix model to which it aspires.
At a time when Netflix is spluttering a bit, ahead of a Disney-led avalanche of new streaming services, we cannot know whether The Athletic will, ultimately, succeed. But its gutsy UK plans are helping to wake up the newspapers that were once known as Fleet Street.
The EPL invasion has hardened the fears that increasingly ambitious digital startups may systematically target other strong areas of UK daily newspaper coverage – and accelerate the decline of these traditional news brands.
One London-based private equity executive claims he might fund a group of journalists to create another digital ‘vertical’. He reckons that business, the arts, crosswords (a la New York Times), and even politics might all be candidates for subscription verticals in the future. He also noted that the op-ed columns which were among the best-read content of many quality dailies were written by a relatively small group of journalists in each case: “Imagine if someone offered all The Times columnists the funds to market their journalism direct to readers at a low-price…”
That seems unlikely. But The Athletic’s UK launch should prompt daily newspaper publishers to:
- Create subscription digital products for their key content, perhaps including Sport, Business, and Politics. They could even enhance their traditional business by providing the new products free to existing subscribers (and even casual buyers). The Telegraph’s Premium Sports subscription at £40 per year (discounted by 50% currently) is a fascinating start.
- Build “pick & mix” subscription services where digital readers can choose which sections they want and pay accordingly. These specialist verticals could be bundled (yes) with complementary services (including TV/streaming), magazines and events. It could become a powerful new business model.
The UK dailies may eventually come to see this latest alarm as the one that galvanized them. But they’ve got to take the plunge.
Exhibitions. The UK-based Informa Plc last year became the world’s largest trade show organiser with its £4bn acquisition of UBM. This week, it reported like-for-like operating profit increases of 8% in the first six months of 2019. Investors were cheered by the successful integration of UBM (give or take some wobbles with the former Advanstar fashion trade shows) and, even more so, by the 7% increase in dividends. The share price also jumped 7% to a year-long peak.
Informa Markets (the trade show division) had the best growth and accounted for more than 50% of revenue during the half-year and 60% of the operating profit, with a margin of 35%. It now has more than 550 trade shows with 40% of revenue coming from North America, 30% from Asia, and 10% from the Middle East. It’s a real transformation from a decade ago when more than 30% of Informa events revenue came from the Middle East alone. It begs the question: When will the market leader decide to concentrate only on exhibitions – with or without some of its ancillary events and information services?
We might expect the £11bn Informa to divest its attractive £500m-revenue STM publishing, sooner or later, because:
- It is the second largest division but the only one which has no obvious synergies with the flagship exhibitions group
- It has the second lowest growth rate
- The company has recently revived the Taylor & Francis name for the division – as if to indicate its potential separation from Informa Tech, Informa Connect, Informa Markets, and Informa Intelligence
But there is another reason. One prospective buyer for Taylor & Francis (T&F) would be none other than RELX whose own STM publishing accounts for 30% of its total revenue. It’s the same company whose Reed Exhibitions is even more obviously non-core than T&F and is the smallest division in RELX with the lowest margins. It had long been the pioneering global exhibitions leader – until Informa swallowed UBM in 2018. Despite the speculation, RELX has always denied it would sell its exhibitions, but the Taylor & Francis opportunity might be just too good to resist.
- It would create a £3bn-revenue exhibitions group, consolidating Informa’s global leadership but with not much more than a 10% market share of the $29bn market (source: AMR/Globex). So, it should be able to get past most regulators with or without some individual divestments
- Reed’s operating profit margins are just 25% (among the lowest of the principal exhibition groups) compared with Informa Markets’ 35%. Hiking the margins could be the prize for cutting Reed’s long tail of smaller shows and reducing overheads. Some rivals think they could increase Reed annual profits by £50-75m – which would push its margins up to something like 30%
- Informa might be able to achieve this transformative deal in exchange for T&F and, perhaps, £2bn of cash (assuming Reed Exhibitions has a value of, say, £5bn and T&F £3bn)
While the Blackstone-owned Clarion Events and a whole raft of private equity firms would also fight to get into an auction for Reed Exhibitions, Taylor & Francis could be Informa’s trump card.
This month, Informa is exchanging its Agribusiness Intelligence (and $30m cash) for IHS Markit’s TMT brands. The deal might almost be a test of what would be involved in a much larger swap with RELX.
If Informa does acquire what is its largest exhibitions competitor, the combination would be the runaway market leader in the best performing media market of all. As a pure-play trade show group, it would be rated even more highly by investors than the current mix of publishing and events. And RELX would finally become exactly what it has long claimed to be: “A global provider of information-based analytics and decision tools for professional and business customers”. A real win-win. Are you ready?
Magazines. The privately-owned Enthuse spec pub group, of the UK, has acquired a 50.1% stake in Shield Wall Media LLC. The Wisconsin-based company was formed to acquire the construction trade magazines formerly owned by the bankrupt F+W Media including: Rural Builder, Frame Building News, Metal Roofing, Rollforming, and the Construction Rollforming Show (launching in Cincinnati in December). The minority shareholder and managing director of Shield Wall Media is Gary Reichert, former publisher of the group at F+W.
Reichert outbid Cruz Bay Publishing Inc, of California, which had also lost out to Macanta Investments’ $4.2m bid for F+W’s largest divisions in arts and crafts. In the event, Cruz Bay successfully acquired Popular Woodworking (out-bidding Meredith Corp. with a $1m offer), Writer’s Digest for $200k (out-bidding Madavor Media), Family Tree ($100k), Horticulture Magazine ($75k), and F+W’s collectibles magazines group ($350k).
While the prices paid by Reichert and Enthuse have not been disclosed, Shield Wall’s valuation is believed to be less than $400k. The share purchase is the latest in a series of bolt-on deals and investments by Enthuse which was formerly My Time Media. It now owns over 30 specialist magazines, digital and events brands across photography, AV, crafts, fishing, and philately, in the UK and US.
This latest investment follows its purchase of a 51% shareholding in the £17m-revenue AA Media Ltd, which provides inspection and rating services to accommodation providers and restaurants across Britain under The AA and VisitEngland brands.
Enthuse Holdings Ltd is majority-owned by chairman and CEO Owen Davies who has built the business after a senior executive career variously with the Daily Mail Group and Highbury House. His co-shareholder is Chrysalis Venture Capital Trust. In 2018, Enthuse had revenue of £10.5m – up 75% on the previous year – with EBITDA of £1.34m (300% up). Some 23% of the revenue came from subscriptions, 24% from non-print, and 28% from outside the UK.
It is assumed that the enlarged group will now have annualised revenues of almost £20m. Davies has a growing reputation as a smart buyer and low-cost operator of under-wanted assets in specialist markets. But his major test may be the development of a digital strategy, which would drive the success of any future sale or IPO of Enthuse. One to watch.
B2B. The listed, London-based parliamentary information business, the Dods Group Plc has acquired the Anglo-Indian Meritgroup Ltd for a price of £22.4m – more than 50% of Dods’ own market cap. The 186-year-old Dods specialises in providing information, magazines and events on politics and public policy in the UK and across the EU.
The company, whose principal brands include Total Politics, Politics Home and The House, is 44% owned by the UK political figure Lord Ashcroft. It has suffered in recent years from successive changes of CEO and board directors, and also from strategic mistakes, related to technology and the erratic shift from print to digital. The history is illustrated by the company’s 2018 results: £21m revenue and £3.5m EBITDA, compared with £46m and £6m a decade previously. Brexit may not have helped.
B2C. Etsy, Inc., the US-based global marketplace “for unique and creative goods including hand-made pieces and vintage treasures”, has agreed to acquire Reverb Holdings, Inc., a privately-held marketplace for new, used and vintage music gear. The price is $275m in cash. Reverb was founded in Chicago in 2013 “to make buying musical instruments easy and affordable”. Its sellers comprise individuals, bricks and mortar retailers, dealers – and also artistes.
News. Sixteen years after Apple’s iTunes store first enabled users to buy the song they wanted and not the whole album, magazine and newspaper publishers have not learned the lessons. Most continue to offer the same ‘package’ in digital as in print. They just don’t want to do anything that risks accelerating the decline of still-profitable print. But you can believe that the refusal to ‘unbundle’ newspapers in their digital versions is yet another reason why millennials stay away: They don’t want the whole package, so they don’t buy any of it.
Even those who would be attracted to specific content like sports, business or the arts, can be deterred by a digital package that’s as dominated by general news as it has always been in print, even though much of it is now freely available online. The UK launch of Tortoise by former BBC and News Corp executives underlined the possible challenge of a service which aims to compete just with the “op-ed” pages of quality newspapers. This month’s revelations of the impending ‘invasion’ of English Premier League football by the paid-for digital The Athletic emphasises the vulnerability of UK dailies, even in areas where they do have high-quality exclusive content. If they won’t give readers the option of buying their favourite content separately, someone else will.
That is the significance of the fact that the New York Times daily crossword now has 500,000 standalone subscribers paying $6.95 per month. The app is now the fifth largest digital subscription product from a US news provider. With a similar Cooking app (said to have more than 200,000 subscribers) and the recent launch of Parenting, these initiatives represent a major strategy by the New York Times which sees them as entry products: since they are priced at less than half of the newspaper itself, they have tended to boost subscriptions for the complete package (whether in print or digital).
The apps are part of the New York Times recovery. But digital revenue is still only 38% of the company which remains dependent on its high-priced print subscriptions bought by ageing readers. So, even the brilliant Crossword app is still so much about the newspaper. The New York Times is not much closer (yet) than any other newspaper to offering the “pick and mix” digital subscriptions that iTunes followers might expect.
But the success so far should prompt daily news brands to realise that such “vertical” slices of content should increasingly be viewed as commercial opportunities to build even larger specialist audiences through deeper content, membership events, and e-commerce – and not just as ways to sell newspaper subscriptions.
Once daily papers start to view these as specialist media ‘channels’ in their own right, it will only be a short step to building new brands that will attract audiences beyond the reach of the newspaper itself. Perhaps they should look at partnering with (or acquiring) specialist magazines, in order to deepen digital content and audiences. From boats to baking and crafts to computing, magazines could help newspapers to build strong specialist verticals. The New York Times’ collaboration with Meredith on magazine specials this year (e.g. “Summer of ’69”) may even get them thinking.
The internet encourages specialisation. Readers, especially digital natives, are increasingly prepared to pay only for exclusive information – and only for the stuff they actually want. You suspect that even the genuinely exclusive content of daily newsbrands is being under-valued and under-recognised because it is only available as part of an indivisible package much of which is unwanted (or, at least, under-valued) by prospective readers.
Newspaper co-branded digital ‘magazines’ could benefit from relatively low content costs, established brands, and the promotional power and subscription skills of many daily papers. Magazines and newspapers could even save each other. What are you waiting for?
News. Two of the largest newspaper companies in the US are reportedly set to combine.
Gannett, owner of USA Today and 109 other newspapers, and GateHouse Media, owner of 156 dailies including the Austin American-Statesman, and Palm Beach Post, are apparently close to concluding a deal to create the country’s largest (by far) newspaper publisher. The combined company would publish 265 dailies with a total circulation of 8.7m – more than a sixth of all US dailies. The second largest company would be McClatchy with a total circulation of 1.7m.
GateHouse Media is ultimately owned by SoftBank, of Japan. Gannett is a listed company with a market capitalisation of some $900m. Earlier this year, Gannett fought off a hostile takeover from regional publisher First Digital Media (MNG Enterprises).
More than 1,800 US newspapers have closed during the last 15 years.
In the UK, insiders are asking what will happen to Gannett’s highly-regarded and soundly profitable UK subsidiary, Newsquest Media. The £197m-revenue/ £35m EBITDA company was formed 23 years ago as a KKR-backed management buy-out from Reed Elsevier. It publishes some 200 newspapers including the Glasgow Herald and the UK’s oldest paper, the Berrow’s Journal, and also specialist consumer and B2B magazines. It is the country’s second largest regional publisher after Reach Plc , the former Trinity Mirror. Newsquest claims 30m online users and 6m print readers, and employs 2,400 people.
It is thought likely that any decision by Gannett-GateHouse to sell-off Newsquest would trigger the next wave of consolidation among UK newspapers. A merger with JPI Media (the former Johnston Press), whose long-suffering shareholders were wiped out recently by a debt-for-equity rescue, could be on the cards. Indeed this prospect might even forestall early-stage negotiations by Reach to acquire some of JPI business which were confirmed this week.
JPI has now said it is formally up for sale with all options being considered including the sale of individual assets or of the whole company. Reach may be most interested in acquiring some major JPI dailies including The Scotsman, Yorkshire Post and the i national tabloid. The possibility of acquiring both JPI and Newsquest might, however, just whet the appetite of private equity firms which have so far stayed away from UK newspaper investments.
Magazines. Scotland is the 17-year-old bi-monthly magazine for people across the world who love the castles, mountains and islands of the UK’s northern country. It has been sold to Chelsea Magazine Company by the privately-owned Paragraph Publishing which loves Scotland so much that it will still be publishing Whisky magazine in honour of the country’s biggest export.
The deal, which includes the Scottish Hotel Awards, highlights the little-known Chelsea, which publishes 18 specialist consumer magazines including Yachts & Yachting, The English Garden, The English Home, and Cruise International. The 12-year-old company, which claims a print and digital reach of more than 2m, has some £12m in revenue. It has proved remarkably steady, and particularly smart at buying – and selling.
Chelsea Magazines is owned by Paul Dobson (yes, he is a Chelsea soccer-football supporter and his offices are close by). In 2005, he sold the 20-year-old Romsey Publishing company to the UK regional news group Archant for some £9m – about 15 x EBITDA. Those were the days. But that was the year when the Norwich-based, family-owned Archant spent almost £16m on magazine acquisitions as it sought to diversify from newspapers. That little spree was equivalent to half the company’s EBITDA profit in 2005. But… more than 5x the operating profit last year.
B2B. The UK’s acquisitive Mark Allen Group (MAG) has negotiated £18m of borrowings from HSBC to fund further deals. This is believed to be the first time the privately-owned publishing and exhibitions company has used debt to finance its growth. The continuing low interest rates (and an erratic stockmarket) in the UK may have persuaded the company to abandon rumoured plans for an IPO and, instead, to borrow.
Some 40% of the debt has been used on the acquisition of Centaur’s engineering portfolio and 12 international transport brands from UKi Media. Much of the rest may be earmarked for the 85-year-old, 44,000-circulation Farmers Weekly from chairman Mark Allen’s one-time employer Reed Business Information, rumoured to be for sale as a remnant of RBI’s trade magazine past. MAG currently has strong information and events in three main B2B groupings: Health, Education and Social Care; Engineering; and Music.
It is expected to achieve almost £60m of revenue (and more than £10m of EBITDA) in 2019-20 – doubled in four years. Up to 40% of the revenue comes from exhibitions (all acquired or launched in the last seven years). The UKi deal is expected to prompt further MAG expansion in international markets. Way to go.
Magazines. Penske Media Corp (PMC), of New York, publisher of ARTnews, is acquiring the 11-year-old online service Art Market Monitor, from its founding editor Marion Maneker. Penske, which acquired ARTnews and Art in in 2018, has a growing portfolio including: Variety, WWD, Robb Report, Rolling Stone, Deadline, and Indiewire. It also has a digital JV with ZEEtv, one of India’s largest media groups.
Owner Jay Penske also operates Dragon Racing, which participates in Formula-E racing. Previously, he was the co-founder of Firefly Mobile Inc, and owns an antiquarian bookstore in Los Angeles. He has variously won plaudits as the “best dressed man” and “one of the 25 most powerful people in LA”. But some of the glamour has been erased by an investment from Saudi Arabian interests which had seemed to indicate either an impending IPO or a transformational deal.
This week, Sharon Waxman’s The Wrap said: “For months I’ve been mystified by Jay Penske’s silence over the $200m investment stake his company, Penske Media Corporation, took from a Saudi government-backed company in February 2018. Since the murder and dismemberment of Washington Post opinion writer and Saudi dissident Jamal Khashoggi in October 2018, Saudi Arabia has become persona non grata in the world of media and entertainment if not in our government. US intelligence reports confirm that Crown Prince Mohammed bin Salman himself ordered Khashoggi killed. Endeavor, the parent company of talent agency WME and sports conglomerate IMG, found its own $400m investment from the Saudi Public Investment Fund untenable. The Hollywood company returned the investment in March of this year.” www.thewrap.com
Events. Everybody loves live events. Newspapers and magazines look for rare rays of sunshine in performances and so-called experiential activity. They’re re-connecting with readers and searching for new profits. Trade shows have never been so hot: a decade of GDP-beating global growth rates has been followed by predictions of at least 5% CAGR throughout 2019-22. Exhibition profits and prices are exploding.
Organisers attribute their success to the power of real networking and human contact in a virtual world. It may also have something to do with the scale of economic growth in emerging markets, notably across Asia: there’s nothing like a trade show for letting buyers see and touch the machinery and equipment on which social and industrial development depends. High profit margins, favourable cashflow, and 70% exhibitor rebooking rates help to explain the M&A boom in exhibitions and why private equity loves them so much.
But will exhibitions ever suffer the digital disruption that has shattered the business models of traditional media? The industry’s smartest bosses assert that digital media is already helping them to target audiences and connect buyers with sellers during exhibitions and beyond. That’s shorthand for: ‘We’re embracing digital, so there’s no risk of us getting blown away like those publishers and broadcasters who thought the world owed them a living’.
Arguably, some exhibitions have already been knocked about by digital. Look no further than the retail shows which were once the largest and most profitable events everywhere. They prospered by attracting hordes of gift shop owners to exhibitions like the International Spring Fair, in the UK, and the New York International Gift Fair. But the ‘Mom and Pop’ gift shops have been squeezed or squashed by Amazon; and many of the survivors are now buying merchandise from – Amazon.
Almost everywhere else, trade shows are booming. But fears of digital disruption persist, not least among executives who know that even high-performing media companies have been wrecked by unforseen changes in the application of technology or in the way that customers spend their time or money.
The suspicion is that the vulnerability of exhibitions may eventually lie in their sheer scale. Huge exhibition halls buzzing with a whole industry under one roof are captivating. No doubt about it. But will the movers and shakers (and others too) tire of the crowds and foot-slogging if they have some kind of choice? And might that lead to the kind of media ‘unbundling’ where people are prepared to pay for the convenience of getting only what they actually want? It may seem sad but many people just do not care about the glorious serendipity of finding something or somebody they weren’t looking for, at events or in print.
The obvious desire to avoid the top-slicing of exhibitors and attendances, presumably, motivates companies to organise “festivals”, a 360-degree blend of exhibitions, conferences, awards, and other learning and relationship-building activities.
They should look at Cannes Lions which was launched as the International Advertising Film Festival all of 65 years ago. Now called the “International Festival of Creativity”, the 2019 event last month attracted a total of almost 40k awards entries from 89 countries for ‘Lions’ across the creative and entertainment industries. For the winners, it’s the opportunity to use the coveted awards to win business and talent. These really are the Oscars.
Delegates from advertising agencies, advertisers, media owners, music and tech companies attend workshops, presentations, and see-and-be-seen parties on yachts and in hotels. Past speakers have included Martin Sorrell, Maurice Levy, Bono, Mark Zuckerberg, Bob Geldof, and Bill Clinton. Like those other music, broadcasting and film events on France’s Mediterranean coast, Cannes Lions is a huge sprawling party of parties which organisers must, somehow, manage: Too much time and money spent outside the venue itself can be (relatively) bad for the organisers’ own profit but too much spent in total can threaten future budgets. This year, everyone was budget conscious.
The 2019 event took place just three months after its UK-based parent company Ascential Plc had described 2018 as “a challenging year” with a decline in revenue (to £57.3m) due to a 20% fall in the awards entries which (like delegates’ fees) account for 39% of all revenue. It had been a rare mis-step by a company whose retail information services strategy had been winning plaudits from investors. It came just just two years after its IPO prospectus had hailed Cannes Lions as “the world’s largest and most recognised festival for creativity in the branded communications industry”, which accounted for 13% (£40m) of the company’s revenue. The prospectus was euphoric about the “cash generative business”, whose speakers and judges even paid their own expenses and whose delegates had been stumping up annual increases of 8%. Ascential managed to stop short of congratulating itself for having more than tripled the revenue (and profit) of Cannes Lions in the 10 years since it had been acquired for £52m (7x EBITDA) by its predecessor company EMAP.
The words must have been ringing in the ears of CEO Duncan Painter when his team had to conjure a response to calls from major agency groups for a shorter, streamlined and more cost-effective event. Publicis Group had temporarily forbidden its agencies from submitting work for the Cannes Lions awards, the majority of whose entrants are from Europe and North America.
Ascential’s plan for “a major Cannes overhaul” was a test for the increasingly global company which had sold-off perfectly profitable non-core B2B magazines and exhibitions in a commendable display of strategic “purity” as it sought to focus only on high-value information services and content-rich events.
In grabbing hold of what could have become an existential threat to Cannes Lions, the £1.4bn company (which last year sold The International Spring Fair) is, incidentally, highlighting some of the ways that trade shows could be disrupted. In addition to cutting the event from 8 to 5 days, holding back prices and investing in tech and targeting, the Cannes Lions “re-set” featured:
- CLX: Invitation-only networking sessions reserved on the opening two days for the industry’s movers and shakers. A real approach to curating an event for specific audiences
- Digital Pass: Remote access to the conference sessions for visitors who can’t be in Cannes
- The Work: A subscription digital resource which includes hundreds of presentations and helps to turn Cannes Lions into a 365-day relationship, supported by the acquisition of the WARC advertising data service
- CMO Growth Council: Marketing chiefs from 25 of the world’s largest corporations have created an agenda-setting forum at Cannes
The fact that the CMOs identified one key challenge as taking account of “society and sustainability” seemed perfect for an event which was headlining the need for creative agencies to address the growing need for “social responsibility”, at the same time as meeting the corporate demand to measure the RoI of advertising – not just its ability to win awards like Cannes Lions.
The Work’s online database of talks and the Digital Pass are reminiscent of the all-conquering (but not-for-profit) TED. The Cannes Lions International Festival of Creativity knew where to look for inspiration.
Ascential is being credited with having moved quickly to make Cannes Lions “more relevant, affordable and accessible”. It took decisive action, even though the refusal to issue a 2018 attendance figure may (sort of) confirm the media report of a 20% reduction in the 12,000 paying visitors from 2017. Of course, the 2019 figures are still to come so the story continues. But the Cannes Lions reinvention has a wider significance.
Arguably, all media-marketing-retail businesses should produce original content as a way of maintaining a mutually valuable year-round relationship with their customers: not content marketing or promotional messages but exclusive information for which customers would or could pay. Content is not just for publishers.
For exhibition and event organisers, selling remote digital access to stayaway customers also seems an obvious innovation even though it is more straightforward for conferences than for exhibitions and complex events. But challenging the proven business model of trade shows is not easy, especially when everything is going so well. And competing with your own traditional offering is always difficult: ask newspapers which persist in selling the whole print-like package rather than segmenting it for digital customers who only want, say, the business or sports sections.
Some kind of interactive remote access is neither a silver bullet nor the extent of the radical change that may eventually emerge in exhibitions but it demands attention. The only way to beat digital disruption is to search out and give all customer groups exactly what they want. Do it first.
News. Germany’s Axel Springer has approved the arrangements whereby KKR private equity will acquire the company’s outstanding shares and operate in a joint venture with majority owner Friede Springer and CEO Mathias Doepfner. The €7bn buy-out is likely to become effective by September this year.
Axel Springer operates in more than 40 countries with major media brands including Bild, Welt, Business Insider, Politico Europe and StepStone classifieds. Having arguably become the most successful newspaper group to make the transformation to digital, Springer now seeks to become a global market leader in digital content and classifieds.
It implies some big acquisitions, perhaps including Adevinta. The Oslo-based company was spun-out of Schibsted earlier this year and operates digital classifieds in 16 countries including Leboncoin in France, InfoJobs in Spain, Subito in Italy, Jofogás in Hungary, and Segundamano in Mexico. It has a current market cap of €6.8bn.
Axel Springer employs more than 16,000 people worldwide and generates 70% of its revenue and 84% of profit from digital.
B2B. The UK’s Centaur Media Plc is keeping The Lawyer and bringing to end its six-month divestment programme which has generated net proceeds of almost £20m from the sale of magazine and event brands including Money Marketing, The Engineer, Employee Benefits, and The Meetings Show. The decision to withdraw The Lawyer from sale is believed to have come after disappointingly low offers for a major B2B brand which many had predicted would fetch £30-40m. It is believed that no offer was received above £25m for The Lawyer which has some £8m of revenue and potential profit of £2-3m. It has increased its digital income five times in three years. It’s a highly attractive growth platform that should never have been put up for sale.
The slimmed-down Centaur (Marketing Week, the Festival of Marketing, eConsultancy, Oystercatchers, The Lawyer et al) may be almost able to maintain its existing profitability, through £5m+ overheads savings including an office move out of London’s West End. Last year, these retained activities accounted for an estimated 70% of Centaur’s £70m revenue. Elimination of the company’s long tail of marginal and loss-making activities (albeit including some profitable exhibitions and financial media) will, therefore, increase profit margins. It will also give Centaur the managerial bandwidth to fulfil the company’s potential, especially internationally.
This is a smart, innovative company that has never quite been able to replicate its 20th century success as the UK’s most prolific creator of weekly B2B magazines, stuffed with classified ads. Now it has the chance. But the next moves and the scale of Centaur’s strategic ambition may depend on the 38-year-old publisher’s complicated relationships with shareholders.
Ahead of an announcement about whether any or all of the sale proceeds will be returned to shareholders, the main strategic question for the £70m listed Centaur is obvious: How will the company now accelerate its growth? Incredibly, investors in this under-loved B2B media company are split between those who want a special dividend or share buy-back and those who expect it to use the cash (and borrow more, if necessary) to expand, especially in data services and beyond the UK. The pause before announcing the next steps implies a process of persuading some feisty investors to support the ambitions of CEO Andria Vidler and her board, now with its fourth chair in five years.
Analysts are hoping for a transformational deal. First on the list may be the £40m UK listed media-marketing consultancy Ebiquity, which would be a great fit. A deal would combine two sub-scale listed companies with complementary skills and revenue, and unlock global growth prospects. Talks must have been taking place. More challenging may be the privately-owned £120m-revenue Mintel International, in the UK, and the smaller MediaPost, in the US. But there are other prospects also among media-marketing publishers in Continental Europe. Get ready.
Events. GL Events, of France, has agreed to acquire 60% of Interwine, the organising company of the Chinese international wine and spirits exhibition, whose managers will retain a 40% shareholding. The €7m-revenue Interwine is held twice annually, in Guangzhou, and has an operating profit margin of 35%. The deal follows GL’s acquisition of majority stakes in CIEC Union, (a Beijing-based exhibition specialist in construction and decoration), and in the Fashion Source textile exhibitions in Shenzhen. It also operates food exhibitions in China.
Established in 1978, GL is one of the world’s 20 largest exhibition organisers (source: AMR), operating 300 trade shows, principally in food, agribusiness, culture, textile/fashion and manufacturing. It also manages a network of 45 venues (convention centres, exhibition centres, and concert halls) across 10 countries, and supplies temporary structures, marquees, spectator seating, and event infrastructure. The company, which is listed on the Paris Stock Exchange, had 2018 revenue of €1bn.
STM. UK academic journal and book publisher Emerald Publishing has acquired Mental Illness journal from PAGEPress Scientific Publishing, in Pavia, Italy. The privately-owned, 52-year-old company publishes 300 journals, 2,500 books and 1,500 case studies. Emerald, which employs 280 people, had 2018 revenue of £49.6m and EBITDA of £10m.
His portfolio now includes some strong digital brands including: Bustle (a women’s digital magazine), Elite Daily (millennial lifestyle), Romper (motherhood), Zoe Report (luxury fashion), Mic (news), The Outline (culture), Flavorpill events – and legendary gossip blog Gawker which he bought out of bankruptcy. BDG claims an aggregate 80m monthly uniques in the US, 75% of whom are female, primarily aged 18-34.
Goldberg has been buying up distressed digital assets at a fraction of previous prices or of the sums spent by starry-eyed investors. He bought Gawker (once worth $250m) for $1.4m, and Mic for $5m (less than 5% of its 2017 valuation). But he wants the world to know he is about more than smart deals and cost-cutting. He claims that revenue at Zoe and Elite Daily have grown by more than 100% in the 1-2 years since he acquired them, and he expects the same from Nylon. Not only will BDG be taking on the whole Nylon editorial and design team, he says he will be paying them more – and hiring more people.
Whatever the detail, even snarky reporters have noticed a new tone from Goldberg who says: “Nylon’s bold and colourful legacy has developed a cult-like status over the years. We’ve been interested in this property for a long time. We felt it was a natural fit for our portfolio. It’s a model of influential beauty and fashion brands. It’s a tough time to be an independent, or family-owned, magazine. But this brand has real strength. We think it can be a premium brand for the next 20 or 30 years.” More than that, BDG plans to bring back Nylon in print — not as a monthly magazine, but in special issues tied to “flagship cultural moments”. It will be BDG’s first foray into print publishing: “We view print as an extension product. It’s impossible to think about Nylon without thinking about the magazine covers. Print is part of who Nylon is.”
He was inspired to get into media by a cousin who co-founded Vimeo. In 2005, Goldberg and two school-friends launched the Bleacher sports site. It succeeded, partly because of the sheer volume of content pumped out (free) by the thousands of sports fans who were the writers and readers of stories that matched what people were searching for on Google. Those were the days when clickbait made digital entrepreneurs into masters of the online universe.
Within a few years, Bleacher was pushing the online sports audiences even of ESPN and Yahoo, which was enough to persuade Time Warner to buy the loss-making site for more than $200m in 2012.
Goldberg left with his winnings and decided to apply the same “citizen journalism” to sites for millennial women.
He launched Bustle in 2013. Critics have consistently sniped at his use of unpaid interns and a sometimes patronising, tone deaf approach to women. But the media industry is now taking more seriously the man who has hired experienced print-centric magazine executives including: one-time editor-in-chief of Condé Nast’s former Details magazine to relaunch Gawker, later this year; and Elle ‘s Executive Editor as editor-in-chief of Bustle, Elite Daily and Romper. The media-savvy appointments, expansion plans and, for example, Goldberg’s acquisition of the struggling, but beautifully-designed The Outline, have been a contrarian force in a market where former high fliers like BuzzFeed, HuffPost, Vice and Vox have been laying-off hundreds of people.
In five short years, Goldberg has grown BDG from one site to a portfolio of eight brands. He says 2019 revenue will be $100m, some 30% up on last year, and the company will be profitable in 2020. Most of his revenue is advertising but there is a growing emphasis on events and e-commerce.
BDG, which claims to be the “largest premium publisher reaching millennial women”, has raised about $80m in funding from investors including GGV Capital, General Catalyst, Saban Capital Group, Social Capital, and Axel Springer. The owner’s well-funded, strategic cockiness is a reminder of some basic truths about the magazine business he is targeting. Much of what magazine people say about their special One2One relationship with readers is true. You don’t need research to tell you that people who read magazines tend to trust the content and even the advertising, beyond that of most other media. But the problem is the business model.
Magazines have not suffered the mass exodus of classified advertising that so speedily drained daily newspapers of revenue. Instead, they have declined more gradually but magazine publishers have been squeezed between the need to create new media and to defend still-profitable print. That has been exacerbated by the simple reality that mass market and women’s magazines (like so many daily newspapers) tend to have relatively small volumes of the exclusive, distinctive, ‘must have’ content that is so vital to attract regular digital readers, let alone persuade them to pay. So much magazine-like lifestyle content is readily available online. That is a painful truth for magazine people as is the explosion of sponsored editorial (“content marketing”) to substitute for clearly identified display advertising. That – and the profusion of free subscription offers and bulked-up, bagged-up retail copies – is breaking the spell of magazines.
Everything about digital media emphasises the primacy of quality over quantity for readers who want to see and swipe. Bryan Goldberg is on to something when he couples his criticism of the broken business model of magazines with a strategy of hiring first-grade magazines people who know all about building deep relationships with readers.
The BDG founder’s assertion that print has a role to play in his mainly-digital Nylon is a reminder of just how much difficulty publishers have in accepting the need for print to become an ancillary channel for audiences that were once so captivated just by magazines. Women’s media, in particular, will increasingly be dominated by multi-media activity comprising:
- Smartphone-first content
- Product licensing
A lifestyle brand’s most profitable activity might come from any one of those ‘channels’, a complete reversal for publishers whose companies were built round the primacy of print, funded both by readership and advertising. For all their digital investments, most publishers remain dependant on print profits and cannot afford not to charge for their content.
Hearst Magazines was once the engine of its neatly-diversified parent and has recently been investing more than most in digital-only services. It’s even headed by former digital boss Troy Young. Next week, Hearst launches its first SVoD “All Out Studio” fitness app promoted by its magazines Men’s Health, Women’s Health, Cosmopolitan, Runner’s World, and Prevention.
The service, launching first on mobile app stores and Apple TV, will offer 35 hours of video content and 15 guided workouts, for a monthly US subscription price of $15, or $100 annually. Hearst magazines provide a strong promotional platform for video streaming but the project is careful to avoid damaging the revenue of its print brands. It will soon face competition from fitness companies like Equinox and SoulCycle which are planning media services offering video, audio and text. You surmise that such fitness specialists – and also digital-only media like Bustle – can produce similar video services to drive web traffic, free to readers as a promotional tool and/or funded by sponsorship and advertising. Unlike Hearst, they don’t have to worry about the ‘risk’ of free content for readers.
That’s the very definition of the disruption that Bryan Goldberg is bringing to magazine-media. He has been able to acquire expensively-built digital brands which, in some cases, are already a match for the much older print mastheads – and all his content is free for readers. He may become a formidable competitor by exploiting these brands, even in print, and says: “We don’t think the magazine companies are investing in the future – so we will.” He has been quoted as saying that BDG is “one of the least clever companies in New York” technologically but is “executing very effectively” on the basics: “Publishing will be fine – the next decade will prove that. What’s happened in the last few years has been unfortunate, a lot of mistakes have been made, but it would be extraordinarily foolish to give up on a product as profoundly important as the written word.”
BDG’s punchy media (and its war chest) is helping to fuel the next wave of investment and, perhaps also, much-needed strategic courage by traditional companies. With consolidation well underway in broadcast-streaming, it’s time for print media to catch up. Will the UK’s Daily Mail Group (failed former owner of Elite Daily) use its 188m global online audience to create ‘vertical’ women’s brands and drive profitability? Will News Corp acquire BuzzFeed? Will BDG buy a print magazine business or vice versa? Get ready.
News. Mediapart, the French digital news service founded 11 years ago by the former editor of Le Monde, Edwy Plenel, has become a not-for-profit foundation in order to preserve its independence and mission of defending the freedom and plurality of the French press. As The Guardian (whose long-standing charity status has inspired Mediapart) says: “The site has become a thorn in the side of politicians, public figures and those with something to hide”. It also noted that, unlike The Guardian which has been struggling to get to breakeven after years of heavy losses, Mediapart is highly profitable: “The website also makes money. Lots of it, despite having no advertising, no public subsidies and no wealthy patrons, being entirely financed by reader subscriptions (currently €110 a year, €50 for students, pensioners and the unemployed or those on low incomes).” The Guardian should be as impressed by Mediapart as much as Mediapart is impressed by it.
When it started in 2008, Mediapart had 25 staff. It now has 80, including a US correspondent, an English-language site, a free “Club” that runs parallel to the main site with blogs and commentaries and is branching out into live video blogs and television. Its protective change of status comes one year after Montreal’s 130-year-old La Presse news group became a not-for-profit, spun-off from its former parent Power Corporation of Canada. La Presse now operates as a “social trust”. Power Corp, which owned La Presse through its subsidiary Square Victoria Communications Group, donated $50n to give the new venture a nice start.
Non-profit journalism is really nothing new. In 1846, five New York newspapers formed a co-operative to share reports from the Mexico-America war. That became Associated Press and is still a non-profit co-operative. New Internationalist magazine has been published for the past 46 years in the UK as one of the world’s longest-lasting non-profit publications. The year after its launch in 1973, came The Chicago Reporter.
More recently, non-profit journalism organizations such as ProPublica, MinnPost and Voice of San Diego have become non-profit journalism organisations, like the London-based Bureau of Investigative Journalism.
In 2016, the cable TV entrepreneur-turned-philanthropist Gerry Lenfest donated Philadelphia’s two largest newspapers – The Philadelphia Inquirer and the Philadelphia Daily News – and a substantial amount of cash – to the non-profit Philadelphia Foundation
There are a rising number of media ventures supported by individual philanthropists, including The City, a website which has been covering local news in New York since April this year. In keeping with the US capital of capital, The City has attracted donations and grants of some $10m – double that of the US non-profit news pioneer the Texas Tribune which started a decade ago. The City’s publisher is a former investment banker (of course) and will spend $4m this year, much of it on his team of 18 reporters. He has almost three years in which to secure revenue funding for the site. Bloomberg estimates that The City is one of about 200 non-profit newsrooms across the US, propelled by the demise of local news.
In the UK, the country’s leading provider of news, the BBC, is proposing to launch a new charity to fund local news reporting, in conjunction with tech companies. The “Local Democracy Foundation” would pay for local journalists to report on local government meetings, while also covering crime and other news stories that were once the staple diet of local newspapers. That’s a nice idea but it might be even better for the new charity specifically to support non-profit news services rather than commercial operations.
At a time when it is facing challenges to its archaic “licence fee” funding, the BBC could become a single-minded, public-spirited patron of charity-delivered news, perhaps providing content, training and technology – at what could be little real cost. But, then, the state-funded broadcaster’s strongest critics among the UK’s daily newspaper proprietors might just get (even more) upset.
Events. SPIE, the Washington state-based international society for optics and photonics, has agreed to purchase Xmark Media, the organiser of key photonics exhibitions and conferences in the UK including Photonex Europe, Vacuum Expo, Graphene Expo, and a range of regional photonics roadshows and university exhibitions. The acquisition expands SPIE activities in Europe, adding to established technical events in locations including Germany, France, and the Czech Republic.
The 27-year-old, two-day annual Photonex Europe highlights the latest technologies and developments in photonics, including biophotonics, fiber optics, imaging, lasers, microscopy, opto-electronics, and quantum photonics. The 2019 event will take place on October 9-10 in Coventry, UK. It is believed that the family-owned Photonex has annual revenue of some £500k.
Xmark Media started life as a mobile exhibition company which ‘toured’ UK industry for years, covering brewing, food, nuclear power, pharmaceuticals, water and other vertical market sectors, before launching Photonex in 1992. SPIE is the international society for optics and photonics, founded in 1955. It serves 257,000 constituents from 173 countries, offering conferences, continuing education, books, journals, and a digital library. It is also the leading global organizer of optics and photonics events. Its flagship, SPIE Photonics West, is held annually in San Francisco.
Sound & Vision. US actor John Leguizamo’s independent Latino media and entertainment company is growing again. NGL Collective, which he co-founded with David Chitel, is acquiring the 10-year-old Hispanicize Media Group (HMG) for an undisclosed sum. The deal includes: Hispanic Kitchen, which offers Latino cooking content to over 1.7m followers, and Latina Moms, a lifestyle, beauty and destination. NGL is also acquiring HMG’s proprietary AI technology which can scour the social media and target Latinos for the delivery of branded social native content. This will give NGL, which produces digital video content and marketing for bilingual US Latinos, an additional edge when offering its services to brands and advertisers.
News. It is 10 years since London’s only evening newspaper was acquired by the Lebedev family whose fortune had reportedly come from energy, banking and aviation interests in Russia. You could sense the relief of the Daily Mail Group which had sustained Evening Standard losses for the previous eight years and could not believe its luck in selling a majority shareholding to Lebedev whose investment “secures the future of the paper”.
The self-confessed former KGB officer Alexander Lebedev and his UK-educated son Evgeny were so confident they could turnround a loss-making UK newspaper that, one year later, they bought another, The Independent. In each case, they paid only a nominal sum but assumed liabilities including property leases at the Daily Mail’s London headquarters. In 2014, they doubled down on news in the UK capital with the launch of the London Live television channel.
But media commentators have never known quite what to make of the Lebedev family, and now they have even more questions to ask.
This week, rival newspapers reported that the parent company of the Evening Standard and London Live made an operating loss of £13.2m in 2018. And the UK government has now announced an investigation into the Lebedev family’s sale of shareholdings in its media companies. In 2017, Lebedev had sold a 30% share in the digital-only The Independent to a Saudi businessman through a company registered in the Cayman Islands. This was followed, in December 2018, by a 30% share in the Evening Standard, apparently to the same person. The UK’s Secretary of State for Culture, Media & Sports launched the enquiry (which will be completed by 23 August this year) apparently after failing to be persuaded by Lebedev guarantees that editorial independence will not be compromised by the deals.
The announcement comes 15 months after the poisoning of Sergei Skripal helped to turn politicians, press and public against Russia, some of whose wealthiest citizens may have investments totalling £20bn in the UK. The 2003 welcome that had greeted a free-spending Russian, Roman Abramovich, as owner of the Chelsea Premier League football club and helped to turbocharge London’s residential property boom, suddenly went cold.
It has all complicated the role of the Lebedev family. Alexander’s KGB past, his home still in Moscow, an on-off relationship with President Putin, Evgeny’s intensely private life in the UK, and hundreds of millions of investment losses in media provoke inevitable curiosity. But, ahead of understanding the role of the Saudi shareholdings, Alexander and Evgeny Lebedev’s recorded investment of more than £130m can be seen to have played a key role in the development of three London-based media brands over the past decade:
The Independent: In 2010, six months after acquiring the 24-year-old, loss-making quality newspaper, Lebedev launched the i, a USA Today-style tabloid. It was the UK’s first new national daily since the 1986 launch of The Independent itself. The i was an immediate success with copy sales which peaked at 300k. Six years later, it was sold to regional publisher Johnston Press for £25m. The Independent itself went digital-only – and has become the model for other ailing dailies in the months and years ahead. Since abandoning print, The Independent, which for years racked up losses, has enjoyed a turnround. In 2018, the second year as a digital-only news publisher, it made operating profit of £3.1m from advertising-led revenue which increased 12% to £24.8m. As if to emphasise the progressive story, The Independent expanded internationally and actually increased its staffing by 50% to 169. A real success that is only just beginning.
Evening Standard: Alexander Lebedev said it was while working as a spy in his country’s London embassy and studying British newspapers, that he fell in love with the Evening Standard. Nice story. But, even as publisher of the city’s last remaining evening paper in the years before digital disruption, DMGT could not make consistent profits from the Standard. Lebedev’s radical plan for the 182-year-old newspaper was to switch it to free circulation. Magic! Within two years, it became profitable for the first time since 2001, as the doubled circulation boosted advertising revenue.
By 2015, the Evening Standard was celebrating its fourth consecutive year of profit. But it all came crashing down the following year with operating losses of £13.5m that have continued ever since. In 2018, now under the profile-building editorship of the UK’s former Finance Minister George Osborne, the Evening Standard (now with a free daily circulation of 860k) made an operating loss of £9.5m (5% less than in 2017) on revenues of £65.4m. Despite the newspaper losses, it has continued to make good profits from its weekly colour magazine and property supplement so we should expect more of them. The stability of the Evening Standard’s print advertising underlines the strength of the paper’s free distribution to commuters throughout London.
It has also been building a strong digital presence, growing UK audience by 21% and overseas readers by 48% in the year to September 2018. This helped to grow digital revenues by 29%. The overall losses in 2018 were partly attributed to the punishing rises in the cost of newsprint, which had increased by some 12-16% with more to follow in 2019. With the evening paper spending up to £15m a year on paper, these cost increases were a heavy blow. But it has suffered even more from the increased costs of “losing” The Independent and the i with which it had once shared overheads and staffing. As a result, its headcount, which had been 234 people in 2012, is now 374 with total people costs up by more than £10m. And the Evening Standard’s share of property rental costs (paid to DMGT) has increased by 80% to £3m since The Independent stopped printing.
London Live TV: In 2014, Lebedev won a new TV broadcast licence for London Live. It was one of many new TV channels launched around the UK as part of a seemingly outdated plan by then Media Minister Jeremy Hunt. The channel’s star-studded launch party attracted UK Prime Minister David Cameron, Elizabeth Hurley, Hugh Grant, Naomi Campbell and Ralph Fiennes. The heady optimism was as plentiful as the champagne. But what the Lebedev family hoped would turbocharge their London media profits has been a disaster, with losses so far of some £36m. Its targeted breakeven in 2017 has come and gone as London Live has reported pre-tax losses totalling more than £36m in the last two years. In 2018, the fourth year of broadcasting, its 2.1m monthly audience was 16% down. Although executives have blamed the UK’s BARB audience measurement system for under-estimating London viewing and, therefore, weakening its advertising sales platform, the channel has clearly failed. Evgeny Lebedev is said to be in sale and/or JV talks with the privately-owned That’s Media, which owns 20 local TV stations, including Oxford, Cambridge, Manchester, York, Swansea, Glasgow and Edinburgh.
Alexander Lebedev demonstrates a strong belief in journalism and the freedom of the media. He is a philanthropist and his famously liberal credentials include a 49% stake, with his friend, the former Soviet leader Mikhail Gorbachev, in Novaya Gazeta – a campaigning newspaper known for its courageous investigative reporting in his homeland. But it is his son who enjoys being the public face of the family media group in the UK. He is involved in the Elton John Aids Foundation, the Journalism Foundation, and ownership (with actor Ian McKellen) of a 300-year-old Thames-side pub. Some have compared the contradictions of the secretive but party-giving Evgeny Lebedev to The Great Gatsby. But everybody likes him and, despite his own periodic forays into journalism and star-struck shoulder-brushing with world leaders, he is a hands-off proprietor who has not sought to influence the views of editors. He knows his business, is tight on cost control, and is respectfully courteous but can be coolly detached. Newspaper readers people know a lot more about his father.
Once Evgeny Lebedev has off-loaded London Live (or at least cut its losses), his objective must be to put the Evening Standard back into the kind of grouping that can produce the cost sharing – and profitability – it once enjoyed. The paper’s relatively steady revenues and the rising digital audience are encouraging signs for the long-term. Given DMGT’s continuing minority shareholding, the most obvious solution would have been to merge DMGT’s Metro free morning tabloid with the Evening Standard. But, after intermittent conversations and DMGT’s own exploration of divestment options for the profitable £70m-revenue Metro, it is now being more fully integrated in the operations of the Daily Mail, especially for advertising sales. Belatedly. So, Lebedev’s ideal plan may now be dead. The alternatives might be some kind of tie-up with City AM, the 14-year-old free financial daily which has a circulation of 85k, mainly in London. The privately-owned newspaper is believed to have revenue of £10-12m and is marginally profitable. It could present content synergies with the Evening Standard’s own strong financial coverage. Other options could conceivably include some kind of merger or JV with one of Global‘s radio stations.
For now, though, the Lebedev family is preoccupied with the UK government’s enquiry, prompted by concerns about the Standard’s editorial independence, not least in the wake of the 2018 murder of dissident journalist Jamal Khashoggi. The UK government has noted that “the Evening Standard has just over 1 million unique viewers each day which equates to 25.3% of all individuals that read a newspaper in London” which justifies the enquiry.
In recent months, some commentators have pointed to a Saudi Arabian media strategy that has variously involved its collaboration in the US with Vice Media, American Media Inc, and a $200m investment last year in Penske Media, the publisher of Variety.
In some ways, it is difficult to understand why the Lebedev family would have sold the shareholdings to Saudi interests other than as part of a wider ownership plan. But, ahead of the speedy conclusion of the UK government enquiry, Lebedev deserves credit for what we do know: the family’s £130m investment in what could yet become one of the UK’s most successful news groups. Hold your breath.
Magazines. Texas Monthly magazine has been sold to Texan heiress Randa Duncan Williams’s Enterprise Products Company. The legendary magazine was founded in 1973 by Michael Levy and was acquired in 2016 by Genesis Park private equity for $25m. It claims a readership of 2.5m. The value of the business is thought to have declined along with advertising revenues. Texas Monthly has won 14 national magazine awards for its reports on controversial social issues which have included reproductive rights and the death penalty in a predominantly republican state. It once featured a cover picture of the shotgun-carrying US vice president with the slogan: “If you don’t buy this magazine, Dick Cheney will shoot you in the face”.
According to Forbes, oil and gas entrepreneur Randa Williams as the 290th wealthiest person in the world with an estimated net worth of $6.4bn. She joins a growing list of ultra-high-net-worth people who have acquired publications they have long enjoyed reading, including: Jeff Bezos (Washington Post), John William Henry (Boston Globe), Laurene Powell Jobs (The Atlantic), Patrick Soon-Shiong (Los Angeles Times), and Marc and Lynne Benioff (Time magazine), and Chatchaval Jiaravanon (Fortune magazine).
Sound + Vision. STV, the Scotland-based TV broadcaster, has acquired a majority stake in the three-year-old production company Primal Media, founded by Mat Steiner, Adam Wood and Lionsgate. There is to be no initial consideration but terms of the eventual purchases of the founders’ minority shareholdings have not been disclosed. The two companies have previously collaborated and the deal helps STV to expand its production, particularly of unscripted show formats. Primal has developed series including Bigheads, Carnage while STV have developed Catchphrase and The Dressing Room.
The £130m- revenue STV is the only one of the UK’s original commercial TV network not owned by the £3.2bn-revenue ITV. But one of the Glasgow company’s largest shareholders has suggested it is only a matter of time before ITV acquires it, suggesting a price of £200m. STV reported a 6% rise in operating profits to £20.1m in 2018. Total revenue was 8% ahead. The broadcaster claimed its strongest share of on-screen viewing since 2009 – up 13%.
New CEO Simon Pitts – who worked at ITV for 17 years, latterly as Managing Director of digital, pay TV, and tech – predicts strong growth for his digital offering STV Player, highlighting “valuable, long-term partnerships” with Virgin Media and Sky, along with exclusive rights to this year’s Rugby World Cup. He wants to move STV moving from being an almost exclusively advertising-supported business: “It is clear that people will pay subscriptions to watch certain high-quality content and some people will pay not to have ads put in front of them and we should be there in that market offering an alternative rather than saying ‘no you must watch ads even if you don’t want them’.”
Pitts has said he would be “happy to talk and potentially collaborate” with ITV and the BBC for the BritBox initiative, a proposed joint streaming service, aiming to rival Netflix and Amazon.
It will be interesting to see whether STV’s diversification into production, digital and pay TV helps it to escape the clutches of ITV – or whether Simon Pitts will just ensure that his former employer pays a high price for a company with so much growing to do. Arguably, the Brexit agonies across the UK, along with speculation about future Scottish independence, could improve investment and confidence in Scotland. STV might, therefore, attract the attentions of non-UK broadcast groups as well as ITV.
Books. The Rowman & Littlefield Publishing Group, a large independent book publisher in the US, has acquired the assets of New York state-based Prometheus Books. Prometheus was founded in 1969 by Paul Kurtz and now has a backlist of 1700 titles under both the Prometheus and Humanity imprints. The titles cover areas including popular science, philosophy, atheism, history, current events and true crime. In November 2018, Prometheus sold its fiction imprints to StartPublishing. The son of the founder, Jonathan Kurtz will continue to run editorial acquisition. Rowman & Littlefield was founded in 2013 in London, is now headquartered in Washington DC, and currently publishes around 2,200 new titles each year.
Magazines. Condé Nast, of the US, is to sell the eight-times-per-year W magazine to a new company formed by Surface Media called Future Media Group. The new entity will hold W along with Watch Journal and Surface as part of a luxury-focussed portfolio. The new group will continue with the print brand and expand its digital presence under the editorship of Sara Moonves, the W style director. She succeeds Stefano Tonchi who is claiming some $1.1m in damages, alleging that Condé Nast improperly denied him severance pay and a bonus.
W was bought from Disney 20 years ago alongside WWD (since sold to Penske Media) and other brands. It now has 500k paid-for subscribers. It is Condé Nast’s third sale after the divestment of Brides (to Barry Diller’s Dotdash) and Golf Illustrated (to Discovery Inc), prompted by the company’s losses of $120m in 2017 Surface has received funding from Magna Entertainment which invested $2m in 2018. The sale price has not been disclosed, although it is rumoured to be some $5-6m. Will the name Future Media Group be just too easily confused with the increasingly global Future Plc?
B2C. Social Life Network Inc, of the US, is acquiring LikeRE. com, the Colorado based real estate online portal operated by Real Estate Social Network, Inc. Denver-based Social Life Network operates niche social networks and e-commerce applications in a variety of sector verticals, including cannabis, tennis, soccer and other sports. The company has licensed technology to LikeRE since it started in 2016.
B2C. Morocco’s real estate portal Mubawab has acquired Jumia House property verticals in the three markets of Morocco, Tunisia and Algeria. Jumia House is backed by Rocket Internet and operates online classified property portals. Mubawab was itself acquired in 2018 by the Emerging Markets Property Group, of Dubai. “The acquisition consolidates Mubawab’s position as region’s leading real estate website, while providing access to the most promising real estate markets in the Maghreb, with more than 90 million people,” the company said.
Sound + Vision.Twilight Broadcasting, operator of radio stations in Pennsylvania in the US, is to acquire news and talk radio station WEEU from Reading Eagle Company. The station was established in 1931 and the vendors are a family-owned newspaper publishing company. Twilight intends to retain the company’s 11 employees.
B2C. It is exactly 10 years since Harvard University students Stephanie Lewis, Windsor Western and Annie Wang hatched the idea of an online magazine targeting college women like themselves. They had been working together on the college fashion magazine and decided to change it into a digital service with fresh weekly and daily content, primarily for women. It was an instant hit at Harvard and also attracted readers from other US campuses. Lewis says: “We realized there wasn’t really an online media outlet that was targeting the college market with relevant content. And who better to provide that content than us, the students who related to it most?”
They decided to go it alone and (even before graduating) created their own online service to give US college women practical advice and inspiration on style, health, love, college living, and careers. It also contained micro-sites for localised content provided by students. That was the start of ‘Her Campus’ in September 2009. Lewis, Western and Wang won a startup competition in Boston which gave them $50k and a free office for a year. That – and $500 borrowed from a founder’s father (and repaid two weeks later) – was the only funding, and they’ve been profitable ever since. By the time they graduated in May 2010, Her Campus was pumping content to and from 30 colleges round the US.
The site grew organically through word of mouth and social media, with nothing spent on promotion. It helped that the co-founders were featured in media lists of cool entrepreneurs published by magazines like Forbes and Inc.
Their objective was to create a place for college women interested in journalism, marketing and media, giving them what has been described as “a taste for working in media at a fun, Cosmo-esque publication”. As CEO Lewis says, Her Campus lets young women get published on a reputable site, helping them to get other journalistic opportunities: “When employers see Her Campus on a girl’s resume, they know that she’s a quality candidate with experience.”
It’s obviously working because the site’s churning team of college journalists have variously been offered jobs with Glamour, Vogue, BuzzFeed, Vanity Fair, Seventeen, Marie Claire, Harper’s Bazaar, People, Huffington Post, Teen Vogue, InStyle, Esquire, MTV, Washington Post, WPP and many more.
Her Campus is the infectious online destination for college women interested in: “LGBTQ+ playlist you need for next weekend”, “7 reasons kissing is good for your health.”, “4 texts to send when you want to break it off with someone you just started seeing”, “Should you make a room-mate contract?”, as well as guides to writing CVs, preparing for interviews, and getting jobs for the summer. And there’s piles of merchandise to buy, wear and use.
Its annual “Her Conference”, launched in 2012 in New York, gives students and recent graduates careers advice. Its College Fashion Week provides a unique nationwide tour of fashion.
Her Campus now has chapters at 380 colleges in the US and in 11 countries across the world including the UK, Japan, Australia, India and South Africa. Each college’s correspondent has editorial and publicity templates to publish their content directly to the Her Campus site which has an estimated 9,000 contributors and some 4m monthly users.
Students at colleges without a Her Campus chapter can apply to become (unpaid) correspondents. By providing localized content, the aspiring journalists are reaching a sought-after demographic for advertisers who have traditionally found it difficult to reach students.
The Boston-based business, which now has some 35 employees, has expanded through roadshows, sampling events, content marketing and advertising for companies including Merck, TRESemmé, L’Oreal, Deutsche Bank, the New York Times, Microsoft, Victoria’s Secret, Intel, and Ikea. They recognise Her Campus as a lifestyle brand and digital media company which reaches a large slice of America’s 11m female students – and their estimated $400bn purchasing power.
The success of the still privately-owned company, Her Campus Media LLC, is reflected in soaring revenues, believed now to be some $15-20m. With such a large volunteer workforce, you have to believe that the profit margins are good too.
The growth shows no signs of slowing, with the appointment now of ambassadors in US high schools to help girls prepare for college. This month, Her Campus acquired the smaller, five-year-old site The Lala which will be rebranded as Her20s, “for women navigating their post-grad lives”. So, they’re expanding at both ends of the college woman’s life, and we should also expect an increasing global push into “new” and existing countries. Inevitably, the world’s universities will become a land-grab race which might, ultimately, persuade the Her Campus founders to seek the outside investment they have eschewed so far. And, years ago, the company registered the domain ‘His Campus’, so who knows what’s next?
Her Campus is a brilliant web site and a brilliant business. Significantly, few of the reader-users we spoke to even thought it was a business: it’s the ultimate sense of community. The “by college women, for college women” service is just the latest reminder of the power of the virtuous circle that can enrich special interest media everywhere. In some ways, Her Campus is like YouTube in the way that the mutual sharing of content “incidentally” helps people to make careers and start businesses.
That’s what makes you think it could be the inspiration for similar media channels among, for example, professionals in different industries. They could share their experience in focused sectors, exchange intelligence and ideas, and pitch for jobs, and assignments or funding for startups. It could be more targeted (and generation-focused) than LinkedIn, and more dynamic than a B2B magazine or professional association. Just think.
Meanwhile, Her Campus is set to become a truly global business, helping graduate women everywhere into that first job, then guiding their lives and careers. Along the way, perhaps it will become a primary recruiting ground for the media and creative industries, and even a quasi-political voice for those who may care most about the future of the planet.
You can’t help feeling that the once-formidable Cosmopolitan magazine, whose brand won the hearts of millions of college women in the decades before Her Campus, could have morphed into this. Perhaps it can yet be inspired by the women from Harvard.
Events. The Blackstone-owned Clarion Events has acquired the Design Shanghai and Design China Beijing exhibitions from Media 10, of the UK. Design Shanghai was launched just five years ago, followed by the Beijing event in 2018. While terms have not been disclosed, it is believed that Clarion has paid £34m for the events which are making EBITDA of some £2.5m.
The deal illuminates the progress of the 17-year-old, privately-owned, £40m-revenue Media 10. The company has 30 events, 13 B2B magazines, employs 250 people and has quadrupled revenue in less than 10 years. But, beyond the UK exhibitions industry, it is still relatively unknown. The Chinese sale has changed that.
It was launched in 2002 by Lee Newton, a one time B2B magazine sales executive (with nine friends, hence ‘Media 10’). After early loss-making years, principally as a B2B publisher, the company’s fortunes have been transformed by four acquisitions and launches across the last 15 years:
2004: Launch of the highly successful Grand Designs Live exhibitions and magazine under a long-term licence to complement the global TV franchise, launched in the UK 20 years ago. Operated erratically in Australia for several years, but still firing on all cylinders in London and Birmingham.
2009: Acquisition of the 111-year-old Ideal Home Show from the Daily Mail after it had fallen on hard times. The exhibition has a distinguished history punctuated by no fewer than 11 visits by Queen Elizabeth and onetime wall-to-wall television coverage. Media 10 bought the legendary UK event (estimated to have revenue of some £5m) for a nominal sum and has rebuilt it into a 17-day event attracting some 250k people annually. It has also cloned the show in Glasgow (successful) – and China (second year and testing). The Ideal Home Show, along with Grand Designs, the Cake & Bake Show, and other TV-linked events has given Media 10 a reputation for consumer exhibitions, although most of its activity is in B2B, especially in design, building and architecture…
2014: Launch of UK Construction Week as eight specialist building exhibitions under one roof, effectively replacing the UK’s long-dead Interbuild B2B exhibition which Lee Newton had attended as a rookie advertising salesman. What is now the UK’s largest construction industry exhibition (attended by more than 30,000 professionals and 600 exhibitors) takes place this year at Birmingham’s National Exhibition Centre and includes co-located events on technology, civil engineering, energy, concrete, and timber, followed by Grand Designs Live for consumers.
2014: Launch of Design Shanghai which quickly became a focus of the booming Chinese design market, and attracts 250 exhibitors and 60k visitors from some 20 countries. Hence Clarion’s 13x EBITDA price.
Media 10’s growth has been bootstrapped with only an unused bank overdraft as an early safety net. It is based in the CEO-founder’s low-cost Essex homeland, rather than in London, and has consistently re-invested would-be profits in new events: even with the increase in revenue from £11m in 2009 to £42.3m in 2018, operating profit has seldom been more than £2m. What started out mainly as a publishing company now derives 85% of its revenue from exhibitions and live events.
Sale of the Chinese exhibitions marks the first time the company has sold any assets and Lee Newton seems to like the taste, more so since he might once have believed the £35m proceeds exceeded the value of his whole company.
Newton, who has a fledgling design show in Johannesburg, is now talking about how to invest his windfall profits – with thoughts of more launches in India and China. Media 10 is no longer flying below the radar.
B2B. DVV Media International, of Bonn, Germany, is to acquire the aviation publishing and conference portfolio (Flight Global) of Reed Business Information, part of the $37bn RELX group. Magazine brands Flight International and Airline Business are the backbone of the portfolio which includes daily publishing at air shows, conferences and awards, jobs and other websites, and is believed to have revenue of some £10m. DVV is based in Surrey, UK, and owned by Rheinische Post, the Dusseldorf-based publisher of the eponymous regional daily newspaper.
Flight International was the world’s first aerospace weekly when it was launched in 1909, just six years after the Wright Brothers’ inaugural flight.
The deal follows DVV’s previous magazine-centric purchases from Reed including Personnel Today, Railway Gazette International and Motor Transport. The aviation brands will complement DVV’s Air Cargo News. “This is a significant step forward for our organisation,” says Andy Salter, managing director of DVV (and former Reed executive): “The new portfolio means we now have a comprehensive offering across… the transport and logistics business information sector. We are all looking forward to working with the new team to build on the legacy of these products and develop a thriving market offering.” Cirium, the RBI aviation division which has divested Flight Global, is to focus on its retained data, analytics and consulting business.
B2B. The UK-based food and farming media business AgriBriefing had hoped to complete an audacious three-way “merger” with Informa Agribusiness Intelligence and Kynetec agri research – at the same time as switching its private equity backing. It has (for now) succeeded only in changing its funding partner. The company announced this week an MBO funded by New York-based Ares Management Corp, replacing its previous partner Horizon Capital, of the UK.
AgriBriefing was established in 2012 and has grown rapidly in the highly-fragmented agri information business since acquiring the UK weekly Farmers Guardian from UBM. It now employs some 200 people in the UK, Netherlands, France and the US.
In 2018, its £6.8m EBITDA was 48% up on 2017, with revenue of £27.4m (£19.2m). There was significant growth in both the France-based Global Data Systems (acquired in 2016) and Urner Barry, of the US (2017). The results showed how far AgriBriefing had moved from its starting position, six years before, as an advertising-dependant, 100% UK company. In 2018, more than 50% of revenue came from outside the UK, 35% from outside Europe, and some 50% of revenue was subscriptions. EBITDA profit margin is 25%, and the total audience comprises some 500k agribusiness professionals in 200 countries.
It’s predicting £8.8m of EBITDA (30% growth) in 2019.
AgriBriefing’s assets include highly-valued commodity price reporting agencies (Feedinfo and Urner Barry), large exhibitions and conferences (LAMMA, CropTec, Feed Additives and the Global Protein Summit) and information services including Foreign Trade Data and Agrimoney.
It is more than a year since Horizon Capital (formerly Lyceum) hired advisers to find a buyer for its stake in AgriBriefing, which is a measure of the difficulties the company faced in chasing its dream combination.
The company had been launched as Briefing Media, by three experienced B2B executives: Neil Thackray (ex Reed, UBM) Rory Brown (Metal Bulletin, Incisive) and Rupert Levy (Haymarket, UBM). They eventually narrowed down to becoming a food-farming specialist after flirting with the medical and international media markets.
Their energetic strategy delivered, as the 175-year-old Farmers Guardian pushed up revenue by 57% in four years. Operating profits jumped 27%. The success was consolidated by acquisition of the 40-year-old LAMMA machinery show and the launch of CropTec for arable farming. Then came the climb up the value chain with data-rich acquisitions.
In 2014, AgriBriefing paid some £300k for the Agrimoney investment site which gave its first foothold in the international agribusiness and commodities market, where it claimed 70,000 users in 170 countries. Next came the complementary £13m acquisition of Global Data Systems, the France-based owner of FeedInfo, the pricing platform for global animal feed. In 2017, it plunged into the US market with the £17m acquisition of Urner Barry, the 160-year-old provider of news and prices in the poultry, egg, meat, and seafood segments of the food industry. That deal alone was said to have added more than 3,000 clients.
This year, the gutsy AgriBriefing seemed set for the leap into the big time which could have produced a £150m company and the prospects of an IPO. But it all proved too hard: for some funders which under-valued the UK print assets, for Informa whose belated reluctance to sell its £30m division was turned instead by the prospect of an appetising swap with IHS’s TMT operations, and by Kynetec (50% larger than AgriBriefing) that may just have been too expensive. But there’s time.
AgriBriefing has come a long way and was tantalised by the prospect of a transformative three-way global deal. CEO Rory Brown must now lower his sights and resume the deal flow of medium-sized data businesses (especially in the US and Asia), knowing that his long-term strategy is sound. It’s just going to be a longer journey than the one he has been dreaming about since Christmas.
Events. EasyFairs, the international exhibitions company based in Belgium, has acquired Aesthetics Media including conference, print, digital and awards properties. The deal complements EasyFairs’ own CCR (Clinical, Cosmetic, Regenerative) event and boosts the company’s media offer in the UK. ACE (Aesthetics Conference & Exhibition) operates in the spring while CCR takes place in the autumn. The whole Aesthetics Media staff will transfer to EasyFairs which operates over 200 events in 17 countries with 2017-18 revenues of €157m. There are persistent rumours that EasyFairs will be sold, either in whole or part, later in 2019. Private equity is circling. Of course.
B2B. Bobit Business Media, of the US, has acquired the Warranty Chain Management (WCM) Conference. WCM is an annual event which links professionals in the warranty management sector. Bobit was founded in 1961 with the publication Automotive Fleet and was family-owned until 2018 when it was bought by Gemspring Capital. The company has expanded through vertical sectors adding events and digital to its B2B information and claims a reach of almost 3m online users.
B2C. WebMD Health Corp, the US medical portal, has acquired Frontline Medical Communications (FMC). The brands will operate separately while the two companies explore integration possibilities. WebMD, owned by the KKR-backed Internet Brands, has a physician focussed website, Medscape, while Frontline also offers continuing professional development including the website MDedge along with events, publications and digital services (apps, webcasts etc) across 20 medical specialisms. Terms were not disclosed. Internet Brands is focused on four vertical markets: Automotive, Health, Legal, and Home / Travel. Its brands include Fodor’s Travel, Cars Direct, and the Martindale Hubbell legal information service.
Magazines. The 132-year-old Hearst Corporation is arguably the world’s oldest multi-media group as a 19th century newspaper publisher which invested in magazines and movies before Rupert Murdoch was born. It also has a fair claim to be the best. Not because it has consistently been the most successful in any or all of its chosen media sectors, or has been the most profitable. Its success can be measured by long-term profitability across most media, and also an ability to sustain partnerships, joint ventures and strategic alliances. The company founded by the fiery W. Randolph Hearst has become the best media partner of all.
The $11bn-revenue family-owned Hearst (which is believed to generate pre-tax profits of some $1.5bn) was built on the successive fortunes of daily newspapers and magazines. Then, in 1990, it became a 20% shareholder in the Disney-controlled ESPN sports cable network which, alongside other broadcast and cable TV networks, frequently accounted for almost 100% of Hearst profits – just as Cosmopolitan had done in the two previous decades as the world’s most successful magazine. And, now as TV comes off the boil, along comes Hearst’s fast-growing business media.
It began in medical and automotive data and accelerated through aviation and the acquisition of the $1.3bn Fitch, the financial ratings and intelligence group. B2B data now accounts for 40% of the Hearst profit, compared with 14% just five years ago. That’s a big shift from 2006 when the widely-admired Frank Bennack (longtime chairman and architect of the modern Hearst Corporation) presided over the opening of the Norman Foster-designed Hearst Tower in Manhattan by saying it had effectively been paid-for by Helen Gurley Brown, the legendary editor whose revolutionary Cosmopolitan magazine had transformed the company in the 1960s.
That was then. Last year the company fought to rebuild its battered magazine profits by appointing as Hearst Magazines president Troy Young, the digital whizz who had spent five years building the US company’s digital audiences, revenues and profit. Hearst had shown the way, first by separating digital from print and then by bringing it all back together again – but with digital now clearly in charge and creating great content sharing systems. Young’s appointment was a shock to many longtime magazine people who lost comfortable berths in the Hearst Tower. But Hearst Corp CEO Steve Swartz (the former financial journalist who has led its investments in business media) wanted real change: “…we need the readers to pay more for the product. And we need to find a way to make digital subscription products work for magazines in the way that they are starting to work for newspapers.”
Business media is making Hearst an increasingly international business. But the company which pioneered the large-scale licensing of magazines (Cosmopolitan once had almost 70 global editions) still has some 300 magazines outside the US, variously owned, part-owned and licensed. In the UK, its wholly-owned subsidiary claims monthly magazine circulations of almost some 4m and a digital footprint of 20m people through 17 brands including Elle, Good Housekeeping, Esquire, Cosmopolitan, Men’s Health, Women’s Health, Runners World, Real People, Country Living, and Harper’s Bazaar. The legendary magazines with their bright colours and feisty cover lines still look good on the news-stands. But they have been filleted by the dramatic loss of advertising and circulation revenue.
The London-based National Magazine Company (now trading as Hearst UK) was Randolph Hearst’s first international business when he started it back in 1910. It has sometimes been highly profitable but relatively modest margins and erratic growth have never worn-out the loyalties of Hearst family shareholders and executives who enjoy summer-time visits. Frank Bennack frequently chairs the London company board meetings, not Steve Swartz who has taken the reins everywhere else. It is this emotional attachment, as much as the commercial potential, that may now lead to substantial new investment in the UK business that last year moved to the stylish “House of Hearst” office building on Leicester Square. It’s a statement.
CEO James Wildman joined Hearst two years ago after a distinctive career in advertising sales and tech across TV, online and newspapers. The open-faced Wildman has brought renewed energy, flair and confidence to Hearst UK, which has helped to grow its advertising and events. He claims that total revenue in 2018 grew for the first time in six years. But the £100m-revenue Hearst UK remains a crystal-clear picture of the challenges faced by magazine publishers. They must adjust to a media market which is, inevitably, dividing between the mega-audience digital platforms and ‘narrow but deep’ multi-media specialists, with only limited scope for “semi-mass market” magazine publishers in the squeezed middle-ground.
Hearst publishes Good Housekeeping which, with its Good Housekeeping Institute testing and ‘seal of approval’, is a golden business with a potential well beyond a mere magazine and test kitchen. Even now, it may account for more than 50% of the UK company’s profits. But there are also 16 other magazine brands, some of which are unprofitable or marginal but which may help to generate advertising revenue across the portfolio. As if to underline how advertising dependance can continue to distort traditional media despite the need to get back to focusing on readers, most Hearst UK magazines pump out free copies (anything up to 50% of the total circulation of individual brands) to boost their audiences and support advertising sales. It is one of the less smart ways in which Hearst UK differs from its peers. Even Good Housekeeping gives away 16% of its circulation. Nobody needs reminding that such hyping tends not to fool advertisers and helps to depress the long-term copy sales revenue on which most UK magazines depend for their profitability.
Hearst UK has two digital-only brands (the showbiz DigitalSpy and the medical NetDoctor), a growing portfolio of content marketing magazines produced on behalf of blue-chip clients, some imaginative brand licensing deals with hotels and furniture makers, and a widening range of events large and small. It is a hyper-active company that is especially good at advertising sales and (even now) at promoting the sizzle of magazines to ad agencies. But the corporate web site can make you dizzy. It is easy to feel that Hearst UK has too many brands, too diverse a portfolio, and is just too busy trying to do almost everything with its magazines – but too little for the future.
The challenge must be to harness the energy with a robust content-focused strategy, mostly defined by something other than magazine brands and that will – in the long-term – be funded primarily by something other than advertising. It’s the familiar task of developing a new business while maximising the profits from the old one.
Hearst UK may have made a start with the embryonic “Financially Fabulous” digital and events brand which gets content and promotion from some of its major magazines. The project could point towards the company’s potential future as a multi-media content specialist in targeted vertical sectors like Travel, Health, Food and Fashion, in which it has an established reputation, real expertise and content. In such a strategy of vertical communities, it could develop new and existing brands in:
- Digital (and even print) information and entertainment
- Events especially exhibitions
- B2B media
- Market research, intelligence and data
The emphasis of a vertical could be on versatility, deep expertise and diverse revenues, hence the added benefit of B2B information services and events. The need, as ever, is to reduce the dependance on print. But, despite its build-up in digital and events, Hearst UK is still dominated by magazines, magazine people, and the language of magazines. It needs to change.
The development of market research and intelligence services could be good diversification for a company that already develops consumer data in order to sell advertising and sponsorship. It has long seemed logical for consumer magazine publishers like Hearst to get into the research business.
A new Hearst UK “vertical” strategy could drive the acquisition of specialist media companies in each of its targeted sectors. It might start with the £70m Centaur Media, the slimmed-down B2B specialist in marketing, research and intelligence. It could follow with targeted new products and services in each vertical. CEO Wildman should be encouraged by the availability of bolt-on media deals in the UK market and by his parent company’s rock-solid balance sheet and appetite for strategic acquisitions. Frank Bennack’s latest visit to London would have made the point. Go on, James.
This week, the redoubtable Mary Meeker (now the general partner at Bond Capital) delivered her annual US Internet Trends Report (see link below), some key points from which are:
- E-commerce is now 15% of retail sales
- Worldwide gamers grew by 6%
- Internet ad spending grew by 22% in the US, some 62% of digital display is programmatic
- Big growth in telemedicine
- The familiar disparity between the time spent on, and ad dollars billed by, print media continues but the gap is closing
Have a wade through the 33-page slideshow:
News. The Maven, of Seattle in the US, has agreed to acquire TheStreet Inc for a total price of some $34m – some 2% of the financial media company’s peak value. Both are listed companies. The Maven provides a digital distribution platform for a coalition of over 270 media providers. The news and media platform is claimed to reach 100m consumers globally. TheStreet – which was founded by American television personality, former hedge fund manager, and best-selling author Jim Cramer who is the host of CNBC’s Mad Money programme – has developed a strong financial news presence which can now reach a wider audience via The Maven platform. In December, TheStreet sold its B2B business units, The Deal and BoardEx, to London-based Euromoney Institutional Investor Plc for $87.3m.
It will now join other brands such as History, Ski Magazine and Maxim on The Maven and will provide the core of a finance vertical. This marks Maven’s third acquisition in the last year. It acquired HubPages and Say Media in 2018. The Street was launched in 1996 and listed in 1997, at one point reaching a market cap of $1.7bn. But, in more recent years, profitability has been challenging, to say the least. It has been loss-making for much of the last two years. TheStreet is expected to generate $50m revenue for The Maven over the next 12 months.
B2C. Multiestetica, an online beauty surgery portal covering Europe and South America which was founded in 2007, has acquired Estheticon, a Czech Republic online community offering patients information regarding suppliers of aesthetic medicine.
Events. One-Zero, an Irish sports business conference, is merging with The Fan Engagement Conference which is also based in Ireland. The Fan Engagement Conference was established in 2016 and takes place in Dublin, bringing together digital and fan engagement executives in athletics. The combined company will also merge with the Irish Sponsorship Summit, which takes place in Dublin in September 2019.
Sound + Vision. Tegna Inc, of the US, has agreed with Dispatch Broadcasting Group to acquire local TV stations WTHR (NBC affiliate in Indianapolis, IN) and WBNS (CBS affiliate in Columbus, OH) along with sports radio station WBNS (Central Ohio). The consideration will be $535m in cash, representing almost 8x EBITDA. The purchase deepens Tegna’s reach in local TV and radio markets, and the company expects the acquisition to be earnings positive after one year. The deal follows previous Tegna purchases this year, of 11 stations from Nexstar-Tribune in March for $740m and Justice Network and Quest from Cooper Media in May for $77m.
Events. Messe Frankfurt, the German venue owner and international exhibition organiser, has acquired a stake in nmedia GmbH which provides Electronic Data Interchange (EDI) services. The acquisition is in pursuit of Messe Frankfurt’s strategy to provide a “Nextrade” B2B digital marketplace with standardised ordering and data services for retailers and their suppliers. It says that Nextrade “eliminates the need to order manually from the individual suppliers – for example on site during trade fairs – thus saving time and money. Orders can be placed day or night, 365 days a year, regardless of whether retailers have their own merchandise management system. This is an area where we can see a need for action as well as definite leverage for future success. Like our trade fairs, this tool will create a perfect match between supply and demand.” Meanwhile, Messe Frankfurt, which currently hosts and/or organises 500 events, is launching an international textile fair in Egypt, date yet to be disclosed.
Sound + Vision. US company Sinclair Telecable is to acquire the remaining 50.1% stake in Emmis Austin Radio Broadcasting from Emmis Communications Corporation, giving it 100% of the equity, for a consideration of $39.3m. The company owns six Austin radio stations and will add to family-owned Sinclair’s stable of six radio stations in Virginia, California and Texas.
Sound + Vision. Mediaset, the Italian broadcaster, is to create a Netherlands-based holding company to become the parent of its Italian and Spanish TV interests. The new company, MediaForEurope, will be listed in Italy and Spain. The aim is for the Berlusconi controlled company to develop pan European interests able to compete with Netflix, Amazon and Disney. It follows Mediaset’s recent acquisition of a stake in German TV company ProSiebenSat.
Books. Penguin Random House (PRH) has acquired the book publishing assets of bankrupt publisher F+W Media for $5.6m. F+W filed for bankruptcy in March; book sales accounted for $22m in 2018 and the company also had a communities/magazines division, the assets of which are being sold separately. F+W Books publishes 120 new titles annually and holds a backlist of more than 2,000 titles.
F+W Media has been a prominent specialist magazine and book publisher since the 1913 launch of Farm Quarterly and Writer’s Digest (hence F+W). Its “passion” categories included fine art, crafts, writing, collectibles, genealogy, gardening, woodworking, and astronomy. In addition to magazines and books, it operated digital services, podcasts, online education, exhibitions – and e-commerce. Its major brands include: Coins magazine, Military Vehicles, Interweave, Quilting Company, Artists Network, Writer’s Digest, Antique Trader, Gun Digest and Popular Woodworking. It all came crashing down in March as F+W filed for bankruptcy with net debt of at least $105m and a mere $2.5m in available cash.
It is just three years since a debt-for-equity swap had cleaned out the company’s former private equity owners and provided what was supposed to be a lifesaving $15m. But it was too little too late and the 2018 filing for bankruptcy brought to an end the intervening years of asset sales, outsourcing, and 40% redundancies. It had been scrambling to stay afloat. Early explanations were that the company had struggled to compete against cheap (or free) online content but the real problem was a poorly executed e-commerce strategy.
As the company began online sales of art, craft and writing supplies, it invested heavily in merchandise, the warehousing to store it, and the tech to manage the whole process. The company now admits: “Unfortunately, these additional obligations came at tremendous cost, both in monetary loss and the deterioration of customer relationships”. The damage was clear: F+W lost no fewer than 36% of its subscribers during 2015-18, while advertising revenue fell by 30%. It said that the seemingly-expensive technology it purchased for e-commerce operations was either unnecessary or flawed, resulting in customer service issues that caused significant reputation damage. Far from saving the company, e-commerce was the only revenue stream that consistently failed to produce profits: last year, for example, $3m in craft revenues had a $6m cost of sales.
It’s a long way from 2014 when CEO David Nussbaum (now CEO of the high-flying America’s Test Kitchen TV shows) announced that F+W was “strategically moving away from our traditional roots in the media business to focus on its fastest-growing businesses, digital and e-commerce.” F+W was full of optimism and was said to have grown its e-commerce business from one “store” with $6m revenue to 31 “stores” with almost $60m. Nussbaum credited the apparent success to “hiring the right people.” But it is now clear that F+W under-estimated the cost and complexity of its e-commerce.
Greg Osberg, the former president of CNET and Newsweek, who became CEO in 2017, told the bankruptcy court that F+W got almost everything wrong: “The company’s decision to focus on e-commerce and de-emphasise print and digital publishing accelerated the decline of the company’s existing business, and the resources spent on technology hurt the company’s viability because the technology was flawed and customers often had issues with the websites.”
Magazines. Exactly three years ago, Time Out magazine promoted its £145m IPO by telling would-be investors that the UK’s star fund manager Neil Woodford would be buying shares. It was a prize endorsement from the celebrated stock-picker whose £32m investment ultimately accounted for 35% of the £90m raised by the IPO. But the price was at the lower end of the target range, and the shares have been under water almost ever since. In three years, Woodford’s investment has lost 40% of its value and Time Out Group’s market cap has fallen to £120m.
That’s a sideshow for Neil Woodford, whose stellar reputation from 25 years at Invesco Perpetual has recently been trashed by the dismal returns of his own five-year-old company. This week, he has even refused to let panicked investors withdraw their funds.
Time Out hardly figures in a Woodford Investment Management (WIM) portfolio once worth £17bn. But Woodford remains Time Out’s second largest shareholder (with 16%), behind the 57% held by Oakley Capital private equity, owned by Time Out chairman Peter Dubens. It gets better. Neil Woodford joined Oakley in 2014 and digital entrepreneur Dubens funded the ‘infrastructure’ for the fledgling WIM which, in turn, became a 19.8% shareholder in … Oakley Capital. This neat little funding circle, inevitably, shades the publisher’s ambitious diversification plans – just as it hopes to attract new investors.
Time Out was launched in 1968 by drop-out student Tony Elliott. Its distinctive entertainment listings, attitude and passion for London life inspired residents and visitors, and became an almost global phenomenon, the cult of Time Out. The magazine and its books scaled the heights of media success for almost four decades – before becoming a victim of all things digital.
It is now five years since Time Out (then largely owned by Oakley Capital) found an unlikely new direction by turning a historic Lisbon market into a branded food hall which brought together “the best of the city under one roof: its best restaurants, bars and cultural experiences”. By 2018, 3.9m visitors were coming to the Time Out Market, arguably Portugal’s largest tourist attraction. After false starts with events and e-commerce, it became the break-out strategy.
Lisbon was followed last month by markets in Miami and New York, with 2019 openings planned for Boston, Chicago and Montreal and 2020 in Dubai, London (2021) and Prague (2022). Of the eight Time Out Markets operating in six countries by 2022, six will be owned and operated by Time Out, while those in Montreal and Prague will be managed on behalf of independent owners. It’s an ambitious strategy for Time Out which is finally swinging away from the heritage of magazine and books which “curate the best of 315 cities in 58 countries” with a claimed audience of 21m in digital and 7m in print. Not a moment too soon.
In 2018, Time Out grew revenue by 10% to £44.8m, 20% (£9m) from the Lisbon market. Operating loss was almost halved to £11.5m. Media and publishing revenues fell 3%. In the UK, magazine revenues rose 2% but events revenue was 40% behind and nobody talks much anymore about e-commerce, which was also down.
Despite claims about digital advertising (+12%) and the brand’s global all-channel audience of 144m people, Time Out’s future is all about restaurants and retail. The four US markets are forecast to generate £12m revenue this year, and £9m EBITDA from £43m revenue in 2020 – when the group expects to be profitable. As CEO Julio Bruno says: “2019 will be a transformative year … Time Out will have markets totalling 185,000 sq ft with almost 4,000 seats and offering food from 120 of the best chefs in these cities.” A very big plunge.
Everything now depends on the markets and Time Out’s ability to recruit the “best” restaurants in each city and to come up with small, reasonably-priced menus they can cook and serve on-site. The restaurants sign contracts for a minimum of one year, with Time Out taking a 30% share of revenues, while it also pays most of the restaurant costs including equipment and marketing.
Time Out makes a big play out of how its media and markets teams collaborate: in addition to identifying which restaurant owners should be in the market, magazine editors also determine which should keep their place, and they keep an eye on the food and performance. A nice theory.
At the very least, it’s difficult to see how the company will be able to sustain its loss-making, £40m-revenue publishing operation (40% still in print) at anything like current levels, let alone give editors the right to veto commercial policy. Once the markets have become established, will publishing really fit? Will it be divested or licensed out? The growing competition for the Time Out markets will require focus and, presumably, more investment.
Almost two years before Time Out launches its first “home” market at London’s Waterloo station, a “communal eating” rival – Market Hall – is operating in Victoria and Fulham, with a major West End opening this summer. Good ideas tend to get copied.
Julio Bruno says “Time Out Market does not exist without the Time Out brand.” Of course. But he probably doesn’t mean all those magazines and books. After all, his investors may now get a lot more demanding.
Events. Leafbuyer Technologies Inc, the five-year-old, Colorado-based digital information service and marketplace for cannabis users, has agreed to purchase the Las Vegas exhibition CBD.io. <CBD is the common name for Cannabidiol, a non-psychoactive cannabinoid found in cannabis which, research shows, may help to relieve joint pain and anxiety. >The deal also includes an e-commerce wholesale and retail site. Last year’s event featured more than 270 exhibitors including Costco, Walmart and GNC. It attracted an estimated 12,000 people across two days which were filmed for a Netflix documentary series. The show also includes VapExpo, a collaboration with the eponymous French show on vaping which recently held its 10th event in Paris.
CBD.io CEO Robb Hackett says: “In 2018, CBD.io hosted one of the largest and most successful hemp and CBD industry expos in the United States. We’re expanding this year to focus on more speakers and educational series, host nearly double the booths, and bring more value to our trade show clients. CBD is a hot commodity in the US, as well as other countries around the world. With Leafbuyer, we have our sights set on locations for trade show expansion in both Europe and Asia in 2020.”
The next event will be held at the Las Vegas Convention Center, Nov 22-23, 2019. The Nevada city is the location of the world’s largest cannabis dispensary. In 2017, the first full-year of legalisation, Nevada recorded retail sales of $425m of recreational marijuana and tax receipts of $70m.
The recreational use of cannabis is legal in 11 of the 50 states in America, including: California, Nevada, Washington, Massachusets, Illinois, Michigan and Vermont. It is legal for prescribed medicinal use in most other states. Marijuana Business Facebook estimates the legal-marijuana industry’s economic impact in the US was between $20-23bn in 2017 and could be $77bn by 2022. Market researcher New Frontier Data estimates that the US cannabis industry directly employs at least 250,000 people, almost equal to the number of employees at US iron and steel mills.
The seven-year-old, listed company Leafbuyer claims to be one of the most comprehensive online sources for cannabis deals and information, reported to reach millions of consumers every month. It self-describes as “the official cannabis deals platform” of Dope Media, Sensi Magazine, and Voice Media Group. The company claims that legal cannabis sales in the US (most for medicinal purposes) have increased revenue from $4.6bn in 2014 to $12bn in 2018 and are expected to reach $17.4bn this year. In the nine months ended March 31, 2019, Leafbuyer made an operating loss of $4.5m (2018: £1.3m) on revenues of $1.3m ($0.8m).
B2C. Axel Springer has more than doubled its stake in the UK’s largest online real estate agent Purplebricks, from 12.4% to 26.6% of the equity, representing an additional investment of €49m. It is buying the shares of former CEO and founder Michael Bruce and his family. Bruce is now no longer a shareholder in the company he launched seven years ago. The share purchase underlines the German publisher’s support for Purplebricks’ distinctive fixed-price online model. One further major shareholder, fund manager Neil Woodford (see Time Out story this week), owns almost 24%. It is widely believed that Springer will soon acquire his stake and, consequently, mount a bid for the whole company.
Axel Springer initially invested in Purplebricks in March 2018 to boost expansion beyond the UK. But that growth has recently been scaled back as the company struggles with falling UK revenues. Shares are currently trading at well below their 2017 peak which once valued the company at £1.4bn. They plunged 40% in February after the company slashed its revenue forecasts, blaming low growth in its fledgling US business and “headwinds” in Australia. It will now concentrate on the UK and Canadian markets and is expected to make revenues of some £145m this year compared with £94m in 2018 and £185m as originally forecast. In 2018, the company made an operating loss of £19.6m.
Purplebricks has tried to do too much too soon with, and the coolly strategic Axel Springer may be the best antidote.
Magazines. Two successors of the founding Pietsch family have acquired Gruner and Jahr’s 60% stake in MotorPresse, of Stuttgart. Subject to regulatory approval, Patricia Scholten and Peter-Paul Pietsch have bought-back the shares in the company founded by their family in 1946 but which were sold to G+J (part of Bertlesmann) in 2005. The company publishes over 120 international motoring and lifestyle brands including Motorrad, Motor Sport Aktuell, and also Men’s Health, Women’s Health and Runner’s World under licence from Hearst, in the US. In 2017, Motor Presse had revenues of €193m. The Hamburg-based G+J publishes mass market brands including Stern, Geo and Brigitte.
B2B information. Tech private equity firm SureSwift Capital Inc has acquired TECHdotMN, an independent online publisher of local Minnesota tech news. The online only company was founded in 2009. Terms were not disclosed.
News. The privately-owned, 123-year-old Paxton Media Group, of Paducah, Kentucky, has acquired four local newspapers based in Arkansas to add to its stable of 32 newspapers (total circulation: 350k) and a TV station which predominantly cover the southern US. The newly-acquired titles include daily The Log Cabin Democrat along with three local weekly titles.
News. Canadian news publisher Steven Malkowich has bought the Bakersfield Californian newspaper, previously family-owned for 122 years through the new company Sound News Media. He already owns California news titles Antelope Valley Press and Lodi News-Sentinel, in addition to being EVP of Alberta Newspaper Group. The Los Angeles Times reports:
“The Vancouver-based Alberta Newspaper Group, where Malkowich is employed as an executive vice president, is run by David Radler, the man who helped fallen media baron Conrad Black build a global newspaper empire. Radler was Black’s longtime right-hand man, and later — in exchange for a plea bargain in their fraud case — served as the star witness against Black. Radler, who was formerly the publisher of the Chicago Sun-Times, served less than a year of his 29-month sentence for fraud. Black was recently pardoned by President Trump. In 2007, Canada’s Financial Post wrote, amid the criminal proceedings, that Radler was ‘quietly amassing a burgeoning community newspaper empire with his eldest daughter’ Melanie Walsh (née Radler). The article details the early holdings of the Rhode Island newspaper group, which have since grown.”
B2B. It is 50 years since the ground-breaking Euromoney magazine was launched by the UK’s Daily Mail Group whose finance editor Patrick Sergeant had predicted the expansion of international banking as a result of the UK’s relaxed foreign exchange regulations. Euromoney championed the boom and became the leading magazine of the financial wholesale markets.
The £6,200 of capital invested in the monthly magazine (£6k from the Daily Mail and £200 from Sergeant himself) created what has become a £1.4bn UK listed B2B information business, self-described as a provider of “critical data, price reporting, insight, analysis and must-attend events to financial services, commodities, telecoms and legal markets.” Its key brands include: Euromoney, Institutional Investor, BCA Research, Ned Davis Research, Metal Bulletin, American Metal Market, Insurance Insider, and IJ Global, and the recently-acquired BoardEx and The Deal.
Its growth helped also to propel the transformation of Daily Mail & General Trust (DMGT) into a vibrant all-media group which has been able to support the systemic decline of its news brands with the proceeds of successful startups, none more so than Euromoney.
Euromoney Institutional Investor Plc (“Euromoney”) built a formidable reputation in B2B media through its ability to crank out long-term profit growth from diversification into conferences, tight cost control, and highly-successful M&A. It was also very good at selling high-priced advertorials in its prestige publications – decades before “content marketing” was everywhere. The company (a DMGT subsidiary, even as a listed company for the past 30 years) also became known for super-generous senior executive remuneration, which irked powerless minority investors.
This year, it has all changed. DMGT has sold-off its majority stake and Euromoney is an independent company for the first time.
That may be a mixed blessing for CEO Andrew Rashbass (ex Reuters and The Economist). He does not have the pay deal that gave one of his predecessors annual remuneration of millions of pounds as a result of a “secret” bonus scheme paying him 6% of profits. But Rashbass is enjoying his new-found independence. Even after recent half-year results showed revenue decline in the investment research businesses that had long powered the company’s global growth, he regaled investors with his “B2B Information 3.0” strategy which commits the company to vital workflow tools for clients – as opposed to “flat” magazine-like services in print and digital.
The strategy features continuing investment in Price Reporting Agencies (PRAs) first acquired with Metal Bulletin all of 13 years ago and augmented through more recent deals to cover metals, mining and forest products. During the first half of its financial year, Euromoney’s “pricing, data & market intelligence” division increased revenue by 3% to £89.7m (more than 50% of the company total). Profits also increased by 3% to £32.7m (50%). But it’s a lot more patchy than it seems and “market intelligence” includes some mixed information services and events. Further, some 50% of all Euromoney revenue came from events, more than half of which were in this “pricing” division – but which themselves were 4% down on the corresponding period of 2018.
Investors are sometimes comforted by the very word “events” because it seems to connect with the soaring fortunes (and values) of trade exhibitions. But many of Euromoney’s events are conferences which can be highly cyclical, with relatively low competitive barriers. Even trade shows can be over-sold. A clue to how a perfectly good company can feel compelled to squeeze its results into a visionary strategy is gained from Euromoney’s description of its ITW (formerly International Telecoms Week) as a “3.0” event which fits into telco workflows. Really, it’s a (very strong) global trade show but not part of the market pricing services which Euromoney is targeting and which may eventually make even super-profitable events non-strategic – and subject to competition from exhibition specialists. It’s a reminder that the transformation still has a way to go. Interestingly, the “banking & finance” division (which includes the Euromoney brand itself) accounted for only 5% of profits in the first-half results.
But an M&A step-up may be on the way. PRAs are attractive because they are the “official” prices which govern trading in the world’s commodity markets. They are the exclusive information sources which facilitate transactions, consulting and high-value research. In many ways, Metal Bulletin (acquired by Euromoney for £200m in 2006) was a PRA pioneer. The operation (now known as FastMarkets MB) began life in 1913 as a spin-off from The Ironmonger magazine, to service the global markets using the London Metal Exchange (LME) for price discovery and risk management. Fast forward a century and the £200m-revenue Argus Media owns many of the pricing indices across energy, metals, petrochemicals and coal. It’s the second largest of the PRAs after energy specialist Platts (part of McGraw Hill). Three years ago, General Atlantic private equity paid £1bn for a 50% share in Argus. It, reportedly, now wants to sell half its stake. Is it too big a deal for Euromoney in 2019?
Rashbass may, instead, go for the privately-owned CRU Group (formerly Commodities Research Unit) which is also celebrating its 50th anniversary. The £35m-revenue London-based company has PRAs across mining, metals and fertilisers. Its 280 employees include analysts and price assessors in London, Pittsburgh, Santiago, Delhi, Mumbai, Shanghai, Beijing and Sydney. It is believed Euromoney and CRU have had abortive “collaboration” discussions in the past. They would be a good fit. Perhaps the trigger now could be the fact that, having both tendered for an LME aluminium price contract, they were awarded it jointly. Euromoney and CRU are working together for the first time, so who knows what’s next?
Then, there is the private equity-owned, £30m-revenue AgriBriefing which has shifted from UK farming news, information and events to acquire agriculture PRAs in France and the US. But it recently failed to buy Informa’s coveted AgriBusiness Intelligence (acquired, instead, by IHS Markit which also knows a thing or two about PRAs). AgriBriefing’s proposed deal would have involved a new private equity owner which may not have wanted to retain the UK company’s lower-value publishing and events alongside its data growth business. So, it may be open to a sell-off.
Euromoney (with no current borrowings) could probably acquire both CRU and AgriBriefing for some £250m. The acquisitions could be transformative, and a precursor to selling-off some of the brands which once defined this remarkable company. Just watch.
Magazines. TI Media (the former Time Inc UK) is believed to be selling its 50% share of the UK edition of Marie Claire. The monthly magazine, which is jointly owned by the France-based Marie Claire Album, is believed to be loss-making. In 2017, European Magazines Ltd (publisher of Marie Claire in the UK) had £9.2m revenue (down 15% on 2016), with an operating loss of £300k, compared with £200k profit the previous year. The magazine’s revenue had fallen 26% in just two years and 40% since 2010. Its ABC audit shows that 35% of the 120k circulation in July-December 2018 comprised free copies. Marie Claire UK’s total circulation has fallen by 47% in the past five years.
Founded by Jean Prouvost (who also launched Paris Soir and Paris Match), Marie Claire was a weekly in 1937-9, when newsstand sales reached almost 1m copies. It was a magazine ahead of its time, combining fashion and beauty with serious and provocative journalism. It was revived as a monthly in October 1954 and, in the 1990s, claimed 29 international editions and an audience of more than 12m. Today, it is published in the US, Australia, Argentina, France as well as the UK.
The identity of the buyer of the UK edition is not known. But it is thought not to be Hearst (whose parent company publishes Marie Claire in the US). It is possible that the magazine is being acquired by Bauer which could merge or manage it with the UK edition of Grazia. The price is likely to be nominal.
TI Media, which last week confirmed the sale of music brands NME and Uncut to BandLab, of Singapore, is thought likely to conclude the sale of other magazines as it seeks to re-focus its broad portfolio on fewer markets, especially those with digital and events growth prospects.
News. German media group Axel Springer may revert to private ownership under a potential KKR deal to buy the shares of Axel Springer shareholders (other than majority owner Friede Springer and CEO Mathias Döpfner) and take the company into private ownership. Döpfner and Springer will not be selling their shares. The current share price values the news publisher at around €6bn and the declared aim is to enhance the long-term value of the business, potentially by facilitating acquisitions more easily beyond the scrutiny of public ownership.
Axel Springer is arguably one of the world’s most successful traditional media groups, having diversified strongly from German-only print to global digital in under 15 years. It is the owner of media brands including Bild, Germany’s top-selling daily, Die Welt, and digital services including Business Insider, UpDay and Politico Europe. However, most of the company’s profit now comes from online classified advertising. Total revenues rose 4% to €3.2bn in 2018.
Springer’s impending ‘go private’ deal has been announced just a few months after Schibsted, one of its leading competitors, de-merged its online classifieds company MPI, prompting us to ask: “Which company will want to merge with the $650m-revenue MPI? Perhaps the most tempting scenario involves Springer, arguably the world’s best news-based digital group. The Berlin-based company (50% international and 70% digital) must once have flirted with the idea of a Schibsted like de-merger when it had a classifieds joint venture with US investor General Atlantic during 2012-16. A combined MPI-Springer classifieds group could become an unrivalled global leader. While Springer’s fast-growing classifieds are concentrated heavily in Germany, UK, Belgium, France and Israel (and, therefore, have relatively little overlap with MPI) and account for “only” 38% of group revenues, they account for more than 60% of its EBITDA – and most of the growth of the €6bn company.”
You can (sort of) imagine what KKR may be planning.
Magazines. Meredith Corp, of the US, has sold the intellectual property of Sports Illustrated to Authentic Brands for $110m, lower than the $150-200m it had reportedly been looking for after seeking a buyer for almost a year since it was acquired as part of Time Inc. Authentic Brands is a brand licensing company; it will take over marketing, development and licensing of the title with Meredith continuing to operate the print magazine and the website. Authentic Brands has a portfolio including the rights to Marilyn Monroe, Elvis Presley and Muhammed Ali. The acquisition includes the magazine’s archive of more than 2m images, and its Swimsuit issue and Sportsperson of the Year brands.
The two companies aim to build a platform around the brand across all media. Meredith will pay a licence fee to continue its editorial operations; Authentic Brands expects to leverage the brand through events, gambling and gaming. It looks like a deal which Meredith has had to stretch to get over the line. Authentic Brands was founded in 2010 by CEO Jamie Salter with $250m of backing from private equity and individuals including George Soros. Given Meredith’s long-term success in brand licensing (not least through its Better Homes & Gardens magazine), it is assumed that these activities will figure in the development plan for Sports Illustrated which has been struggling, like many other print magazines, to compete with (or monetise) the web.
The Sports Illustrated sale completes Meredith divestment of the unwanted Time Inc assets which included Time magazine (sold to Marc Benioff, CEO-founder of Salesforce) and Fortune (sold to Chatchaval Jiaravanon, of Thailand), while Money has been closed. Total proceeds of the three deals are $450m which is thought to be some $150m less than the company had expected when it paid a total of $2.8m (including debt) for Time Inc in 2017. The Des Moines, Iowa-based company is also believed to have over-estimated the net proceeds from the sale of Time Inc UK (now TI Media) which were, ultimately, less than 50% of revenue.
The disappointing sale proceeds (underlined by the slightly tricky Sports Illustrated deal) will prompt Meredith investors to scrutinise closely its progress with the retained Time Inc assets, not least People, which remains America’s most profitable magazine. For all the talk of People’s collaboration with Allrecipes, justifying the $2.2bn spend on Time Inc (net of disposals in the US and UK) may now be much more challenging than expected, even for the famously low-cost publisher.
Meredith’s commitment to deliver at least $550m of cost savings by 2020 is just the start. As Reed Phillips, chief executive of media investment bank Oaklins DeSilva+Phillips, told the Wall Street Journal: “When they bought Time Inc, it was a very big bet that they could transform the business. The jury is still out. They probably have two to three years to prove that they have a strategy that makes the business much less dependent on print.”
News. Seven West Media, the Australian publishing and TV company controlled by Kerry Stokes, has bought the remaining 50.1% of Community News Group from its majority shareholder News Corp Australia. Community News covers Western Australia including Perth through 12 suburban newspapers and 17 digital properties. Seven West owns Australia’s Channel 7 TV, Pacific Magazines, and The West Australian.
B2B information. Netherlands-based Academy to Innovate HR (AIHR), a provider of online education to HR professionals, has acquired the blog Digital HR Tech which claims 650k monthly uniques. The blog will continue as AIHR Digital and will complement the parent AIHR Academy and blog. AIHR aims to enable online training for HR professionals as an alternative to traditional classroom teaching. It attracted over 1m web visitors in 2018.
Sound+Vision. French company Canal+, owned by Vivendi, has bought pay TV company M7 from its owner, the private equity group Astorg Partners in a deal valued at over €1bn. M7 operates in Benelux and central Europe with a turnover of €4m. Canal+ is aiming to withstand the threat of Netflix which now has 5m French subscribers.The deal has added 3m to subscriber base to take Canal+’s total subscribers to 20m – almost doubled in five years. M7 does not produce content of its own but transmits Disney Channel, HBO, Eurosport, National Geographic and Nickelodeon. Vivendi remains keen to expand into southern Europe despite its (so far) failed co-operation with Mediaset.
Sound + Vision. Italian broadcaster Mediaset has bought a “friendly” 10% stake in German TV company ProSiebenSat1. Mediaset is controlled by Silvio Berlusconi and is one of many TV companies trying to counteract the threat of Netflix. The two companies are already members of 12-member group the European Media Alliance with an audience over 200m. Vivendi, the French media company, holds a 30% stake in Mediaset but this stake has been frozen by Italian authorities while it considers media concentration.
Sound+Vision. French TV group M6 is to acquire the TV interests of fellow French company Lagardère, excluding its music and ballet channel, Mezzo for €215m, subject to regulatory approval. The TV turnover of Lagardère was €98m in 17 with EBITDA of €20.6m. It operates family and children’s brands including Gulli and its reach extends internationally into 90 countries. Lagardère is to sell Mezzo separately and intends to focus on its publishing and travel retail businesses.
Events. Charterhouse private equity (until last year the majority owner of French exhibitions group Comexposium) has made an agreed bid of £668m (including the assumption of debt) to take the UK quoted Tarsus Group private. The price is said to be 17 x EBITDA of the last two years, although one analyst (suggesting the possibility of a counter bid) pointed out that it might be “just” 12.25 x EBITDA forecast for 2019. Tarsus Group, which is registered in Ireland, operates more than 150 exhibitions in the US, South America, China, South East Asia, the Middle East, and Europe, in sectors including aviation, medical, labels and packaging, travel, housewares and automotive. Its flagship brands including Labelexpo, Connect and the Dubai Airshow. It also owns the US-based Trade Show News Network (TSNN), claimed to be the most widely-used events database with some 130k registered web users.
The company was founded 21 years ago by its chairman Neville Buch, a former investment banker and boss of Blenheim Exhibitions (acquired by UBM for £600m in 1996) from which many members of the Tarsus senior team came. The highly-rated Doug Emslie will continue as CEO under private equity ownership. The deal can be expected to increase the pressure for the £36bn RELX data-tech group to sell its highly profitable, £1.1bn-revenue Reed Exhibitions division which operates 500 events worldwide and was the global market leader until Informa acquired UBM last year. At the Tarsus bid-level, Reed could be worth £4-5bn.
Announcement of the Tarsus buy-out today pushed up the shares of exhibitions group ITE by 5%, valuing the company at £575m. One analyst speculated that the Blackstone-owned Clarion Events might now bid for Tarsus, although most insiders expect the next big exhibitions deal to be the sale of the privately-owned, Belgium-based EasyFairs, perhaps later in 2019. The whole clutch of UK and US private equity firms who have been rotating through trade shows this past few years are all waiting for the sign that Reed Exhibitions is on the way.
All media. As sales of iphones, ipads and macbooks slow, Apple is is rapidly moving into the content business. Its video streaming challenger to Netflix is coming soon. But first comes Apple News+, the revamped Apple News which incorporates Texture (“the Netflix of magazines”) which was acquired last year from publishers Condé Nast, Rogers Media, Meredith, and Hearst. Apple News+ was launched in the US last month, priced at a $9.99 per month, and is an ‘all-you-can-eat’ magazine and newspaper subscription service which includes content from The Wall Street Journal, Los Angeles Times, the Toronto Star and 300 magazines, either tied-in by the Texture sale or attracted by the prospect of immediate distribution to 1.4bn devices. But it means publishers giving up the direct connection to their readers. They don’t get data because Apple doesn’t track users, which means advertisers can’t target them. But many reckon it is still a powerful way of attracting new audiences to media brands in search of growth.
One person who’s unimpressed by Apple News+ is Alex Kroogman, founder and CEO of the 10-year-old, Canada-based PressReader Inc, who also describes his company as “the Netflix for news”. Everybody does it. The reading platform offers unlimited access to full versions of more than 7,000 newspapers and magazines throughout the world.
The company is keen to emphasise its commitment not just to magazines (in which there is a growing number of competitors in Europe and the US) but also to newspapers where, until Apple+, there have been fewer alternatives. PressReader grew out of Kroogman’s former NewspapersDirect which re-printed the world’s dailies for foreign travellers in hotels and on cruise ships: “I was on vacation in Malaysia. I was sitting in a pool and wondering about home. I was thinking about Vancouver. What were the election results? What was happening? It was 1998 and the internet wasn’t exactly readily available. That’s when I knew I wanted to connect people to the stories they care about, no matter where they are. It sounds simple now, but in 1998 it was unheard of.”
The steady success of PressReader is based on replicating, in digital format, the traditional experience of print. It claims some 12m monthly users either pay for single issues, or $29.95 for a monthly all-you-can-eat subscription, or are gifted access by sponsoring airlines, hotels, public libraries and corporations. Skift says: “For airlines, cruise companies, and hotels alike, choosing what content to share and how to make it available becomes another branding opportunity.” The model is simple: like magazine-centric services Magzster, Readly, Zinio, and also Apple+, PressReader pays publishers every time someone reads their content.
Its proprietary technology extracts text and images from the print editions so that readers (using apps available for iOS, Android, Amazon and others) can browse online content or download whole editions on tablets or smartphones and instantly translate in up to 18 languages. Readers can have the content read aloud, share it, and search across millions of articles — all the things that PDF editions, for example, won’t let them do. But all that PressReader needs from its publishers is the same PDF they send to their printers. The aggregator does the rest.
There is something else that publishers have come to like: “We pay them as though someone actually purchased that issue. The bonus is, publishers then get to count their PressReader consumption toward their audited circulation in the majority of countries around the world. For many of them, this is important. It helps them sell print advertising at better prices — because our digital editions include everything you see in print, ads and all.”
The company, which employs more than 500 people, principally in Canada but also in Ireland and the Philippines, had revenue of $28.4m and made a 10% pre-tax profit margin in 2017-18. Despite the quaint branding, PressReader claims more than 20% of the direct, paying subscribers to its app are under 35.
This month, it signed with Hearst, in the US, to give access to 23 leading magazines including Cosmopolitan, Elle, Esquire, Good Housekeeping, and Harper’s Bazaar. It already has deals with many other major publishers including Meredith, Singapore Press Holdings, Bauer, Mondadori, Burda, TI Media, Dennis, Washington Post, News Corp, The Guardian, Telegraph Media Group, and Condé Nast.
You might not have heard much about PressReader which Kroogman puts down to not having raised (or spent) millions for marketing. But, before you can ask the obvious question about the impact of Apple doing just that, he says: “There are a few different news aggregating products on the market, but PressReader is different. We’re the closest thing to a “Netflix for news”, being the only platform in the world that brings together both newspapers and magazines on a global level.” Until Apple News+ really gets going. Perhaps.
The PressReader tech is impressive and the lack of large-scale marketing may be only part of the reason it is not better known. The company is guarded about its revenues (even though these can be found in public filings) and about its shareholders and financial backing. It is anyone’s guess whether the vagueness has anything to do with the fact that at least one of the PressReader investor-directors is a citizen of Russia, the birthplace also of Alex Kroogman.
It remains to be seen whether Apple+ will eventually upset the cosy world of PressReader which has been profitable for five years. But the key strategic issues may be: whether such services will eat traditional media rather than feeding it; and whether the existing services themselves will be vulnerable to more focused competition.
Some publishers are convinced that PressReader et al can help to generate ‘new’ revenues from ‘new’ readers, while others are content to take the profit regardless. The Canadian company’s emphasis on business and travel audiences has been reassuring for media partners but Apple worries them more. If Apple+ takes off, will it erode media branding by, for example, mixing up the content (even more than currently)? And might the tech giant eventually produce some own-brand content, effectively to compete with traditional providers? The questions highlight the all too familiar challenge of a platform that can become more powerful than the media it initially befriends.
Perhaps more significant, though, is the actual potential of all-you-can-eat reading. The market is still relatively small, evidenced by PressReader’s painstakingly built $28m of worldwide revenue and a growth rate last year of just 7%. Even if Apple does much better, how many readers will really be loyal to a service whose pricing and presentation must reflect the inclusion of thousands of publications they will never look at? The comparisons with Netflix do not stand up. One is a global TV channel packed with original content calculated to appeal to its target audience (with cookies to guide it); the others are large collections of disparate publications together trying to appeal to, well, almost anyone.
So, while PressReader provides unrivalled reading choice, online users may never want to access many more magazine and news brands than they would have contemplated buying as print from news-stands. That realisation might just prompt some publishers to think creatively about how to manage – and monetise – their own digital audiences. Specialist publishers, whose magazine-centric brands are already among the most internationally-marketable media, may consider targeting enthusiasts with focused groups of the world’s magazines in sectors like sports, hobbies, motoring, science, tech, food, and crafts. The same could go for single-sector B2B media and, perhaps, even for the world’s leading daily newspapers. Publishers, which have long been prepared to share retail distribution and marketing with their direct competitors, should consider doing the same in the digital space. Perhaps there’s even scope for such specialist media services to work with PressReader as a tech partner.
Ten years ago this week, Rupert Murdoch said: “The current days of the internet will soon be over.” He was referring to the disastrous knee-jerk strategies of so many daily newspapers (including his own) which made their content freely available on the emerging worldwide web. In their panic not to be left behind by booming digital audiences, daily papers had wrecked the business model and the news business would never be the same again. Traditional media might just be approaching another of those pivotal moments. Think carefully.
Events. Australia’s Nine Entertainment Company (NEC) is selling many of the events acquired as part of its A$4bn Fairfax Media deal last year. The Ironman Group, of China, is paying A$31m for five sports events including The Sun-Herald City2Surf and The Sydney Morning Herald Half Marathon, while the division’s seven business and food events (including the Night Noodle Markets, Good Food Month, The Australian Financial Review Business Summit and Women of Influence Awards) are being retained by NEC. Ironman is a division of Wanda Sports Holdings, of Guangzhou, which also owns Australia’s Hoyts Cinema chain. The group operates 230 sports events in 53 countries, including the Blue Mountains ultra trail race and Noosa Runaway marathon, in Australia.
The deal follows NEC’s A$125m sale last month of the former Fairfax regional newspapers to a consortium led by the former CEO of NEC’s Domain property digital which itself is believed to be of interest to News Corp (owner of the rival REA). But there has been no confirmation of any negotiations about it. NEC is reportedly struggling to sell the former Fairfax operations in New Zealand.
B2B/B2C. Remedy Health Media, of the US, digital publisher of Health Central, Health Central Guides, TheBody and TheBodyPro, has acquired Vertical Health which produces content for patients and healthcare professionals across diabetes, mental health, and pain management. Its brands include EndocrineWeb, OnTrack, Diabetes, PsyCom, Spine Universe and Practical Pain Management. Remedy has private equity backing from Topspin Partners.
News. The privately-owned Illiffe Media Group, of the UK, has acquired local paper the Newbury Weekly News via a JV with Peter Fowler. The new Newbury News and Media will be a unit of Iliffe Media Group which was re-started in 2016, launching the Cambridge Independent and subsequently growing through acquisition. Its former family-owned portfolio of newspapers was sold to Local World (along with the regionals of DMGT) and then acquired by Reach Plc (formerly Trinity Mirror). In 2017, it acquired 13 regional papers from Johnston Press for £17m. The Newbury Weekly News was established in 1867 and has been family owned until now. The sale competed on May 1 and terms have not been disclosed.
B2B. Webedia, the French media-tech company, has bought Quill, of the UK, from its private equity owner Panoramic Growth Equity. Quill provides content for e-commerce operators. The company was founded in 2011 and has grown rapidly with clients including eBay, Google, Louis Vuitton and Tommy Hilfiger and estimated revenue of £7m for the current year. Founder-CEO Ed Bussey will continue to run the company. The acquisition will give Webedia a combined network of over 7,000 freelance content creators, expanding the B2B capability of the previously entertainmen- focussed company. Terms were not disclosed.
B2C. Canadian e-sports and video game developer OverActive Media (parent of Splyce and Toronto Defiant) has acquired Toronto e-sports company MediaXP and subsequently launched a live events division, OAM Live, with the aim of developing a global e-sports platform. MediaXP was founded in 2015 and clients include Dome Productions and Red Bull Canada.
B2B. UK quoted information and exhibitions group Informa is continuing its portfolio management journey (following its acquisition of UBM) with an exchange of assets with IHS Markit. Informa is to exchangs its Agribusiness Intelligence portfolio (operating in the UK, North America, Europe and the AsiaPacific) for IHS Markit’s Telecoms, Media and Technology subscriptions, research and consulting brands.
The deal will strengthen Informa’s position in IT, Communications, Security and Transformational Technology and expand its reach into Asia and North America, with revenues for the enlarged Informa Tech division expected to total $350m. IHS Markit is committed to expanding in Agribusiness. The deal values the two businesses at similar EBITDA multiples, with Informa paying $30m in cash to reflect the higher EBITDA of the TMT business. The transactions should complete in July, subject to regulatory approval.
The deal will have disappointed the private equity owners of the UK-based AgriBriefing which had hoped to effect a transformation, with acquisition of Agribusiness Intelligence. It must now hope to acquire Kynetec, the £40m-revenue, 17-year-old farming market research specialist which had been divested by Frankfurt-based GfK in 2016. The Inflexion private equity-owned company has become a world leader following acquisition of an Ipsos subsidiary in North America and Market Probe in Continental Europe. AgriBriefing grew by 50% in 2018, including through the successful acquisition of GDS, in France, and Urner Barry, in the US. The enlarged company made EBITDA of £6.8m (2017:£4.6m) on revenue of £27.4m (£19.2m). Some 50% of revenues derived from the UK (2017: 74%), 35% of revenues came from the US. The company employs 186 people.
Magazines. Singapore-based music-making platform BandLab Technologies, which last year acquired Guitar and MusicTech magazines, is increasing its investment in media by buying New Musical Express (NME) and Uncut from TI Media (formerly Time Inc UK).
NME was one of the UK’s oldest music weeklies and (copying America’s Billboard) became the first to publish the record charts when it launched in 1952 as “The Accordion Times and Musical Express”. Its early website, launched in 1997, quickly became one of the world’s largest music sites. But weekly circulation, which had peaked at 300k in the 1960s, fell to just 15k by 2015 when it became a 300k free weekly. After incurring losses of at least £2m for two years as a free magazine, NME ceased printing and became digital-only (and profitable) in 2018. Uncut was launched 22 years ago and currently sells some 40k copies, about 50% of its peak. The monthly is believed to be making profit of some £600k, half of which is generated by bookazine-priced specials produced from the NME archives.
NME and Uncut are being acquired for some £7m, an above-average 8x EBITDA price that might partly reflect the value of the 65-year archive. It is believed that BandLab plans to revive NME as a monthly print magazine.
The music magazines are among the first divested by TI in plans to trim the company’s 40-brand portfolio. The former IPC Magazines, which once accounted for more than 50% of all magazines sold in the UK, now has revenues of £200m, 30% down in the last three years. Operating profit in 2017 was £20m, just enough to meet the rationalisation costs of the company which, 12 years earlier, had pre-tax profits of £70m.
The publisher, whose major brands include many of the UK’s best-known magazines including Country Life, Woman’s Weekly, Woman & Home, Yachting World, Ideal Home, and Wallpaper, may generate 50% of its profits just from the TV listings market where What’s on TV and TV Times magazines have an aggregate weekly circulation of 900k. While the company has been usefully diversifying into TV production with documentaries for the BBC and A+E, TI Media’s future success will depend on a more focused portfolio and some targeted digital investment to shift the emphasis from magazines.
The company’s broad reach belongs to an era when publishing groups enjoyed scale economies in sales, marketing, printing and distribution. It must now find a new rationale. Perhaps some of the TV/video production, events, research and marketing services that have been serving the magazines could become self-standing businesses. A media company which habitually spends time and money explaining to advertisers how consumers spend theirs could, for example, grow a market research business.
One long year after it acquired the publisher for £130m, Epiris private equity has a slim-down growth plan and will be expecting newly-appointed chairman Tim Weller to expedite it. But, in the week when specialist media group Discovery Inc acquired Golf Digest magazine, the Singapore company buying TI’s music magazines demonstrates how the content, brands and relationships can be catalysts for digital media.
BandLab is an easy-to-use, all-in-one, social platform that enables creators to make music with fellow musicians everywhere. BandLab combines music making and collaboration tools like the world’s first cross-platform, cloud-based ‘Digital Audio Workstation’, with video sharing and messaging – across Chrome, Android and iOS. The service can be used on smartphone, laptop and even wearables, so people can make music anywhere, anytime and get feedback from others. It is a completely free and unlimited service. The monetisation comes from BandLab companies selling musical instruments and kit, including Swee Lee, the 73-year-old Singapore company that is Asia’s largest music retailer.
Having acquired the MusicTech and Guitar magazines from Anthem Publishing last year (but failing to acquire Rolling Stone magazine), CEO-founder Kuok Meng Ru is reminding us that such content (and even print itself) can play a key role in a community of enthusiasts. He is a guitar-playing music enthusiast who avidly read NME at school and university in the UK. He says BandLab was born out of a frustration that, even though tech has raised the quality of the music-making process, it has made it more fragmented.
The brilliant three-year-old BandLab platform now has 7m registered users from 130 countries making more than 2m songs every month and it’s growing fast. Last week, it was showcased at the prestigious annual Google I/O conference in Mountain View, California, where it wowed 7,000 leading Android developers with its role both as a creative tool in paediatric cancer care (students banding together to cheer up a terminally ill child and bring his favourite things to life using video, art, and music); and in the production of a commercial dance track (produced by three artists collaborating from the US and UK) which made the top 10 dance chart.
Kuok’s declared mission is “a world in which there are no barriers to the making and sharing of music – regardless of where you come from, what music you’re into or how much you earn. We are humbled by the fact that the growth of our user base, music creation and increasing engagement rate shows we’re delivering somewhat on what you (both creators and listeners) want and are looking for.” That’s the passion digital entrepreneurs can bring to global media networks produced ‘by enthusiasts for enthusiasts’. Specialist magazines are no longer dominant, but they can still be a key part of the mix.
All Media. Discovery Inc, of the US, has acquired the monthly magazine Golf Digest from Condé Nast in a deal estimated to be worth $30-35m. Discovery is making a push into golf entertainment with a 12-year, $2bn PGA Tour contract, a content deal with resurgent champion Tiger Woods, and its GolfTV streaming service which offers instruction, equipment advice, course rankings, travel destinations and online bookings to subscribers.
Golf Digest will continue to publish in print. The monthly magazine, which has licensed editions in more than 60 countries, had previously been purchased for about $400m in 2001. It claims 4.8m readers, 2.2m social followers, and 60m video views. David Zaslav, Discovery president/CEO, said: “Golf Digest is a world-class brand that has become the ‘go-to’ authority for millions of golf enthusiasts, professional players and global advertisers”.
The acquisition shows how digital media can make good use of magazine brands, content and relationships to augment multi-platform global networks. It also highlights the strategy of Discovery as a company which has come a long way since the pioneering launch 34 years ago of the eponymous documentary TV channel.
It is now the self-described global leader in “real life entertainment”, serving a passionate audience of “super fans” around the world with content that “inspires, informs and entertains”. Discovery delivers over 8,000 hours of original programming each year to 220 countries in 50 languages. Its brands include: Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, Motor Trend, Animal Planet, and Science Channel, as well as OWN: Oprah Winfrey Network in the US, Discovery Kids in Latin America, and Eurosport.
Increasingly, the $11bn-revenue Discovery (60% US) is a collection of global special interest networks connected variously by broadcast, online, events and (perhaps) magazines. At the recent Deloitte media conference in London, Discovery international CEO J.B. Perrette, marked the 3oth anniversary of Discovery’s first launch outside the US by contrasting the streaming strategies of Netflix, Amazon, Apple et al (“whose strategy is to enable viewers to escape and lose themselves”) with Discovery’s “totally different strategy: Real life entertainment is even more powerful because that’s where people come to find themselves. We power people’s passions. We build communities of fans and target groups who want to ‘view and do’. We are all about Entertainment, Information and Empowerment across all screens”.
He noted that one key to the Discovery strategy has always been to own almost all of its content for every platform in every market round the world – “even when the world was linear”. That is now paying off.
The Discovery strategy effectively challenges the “by enthusiasts for enthusiasts” magazines which have long dominated special interest media. Discovery’s acquisition of the UK-based Global Cycling Network from long-time magazine executive Simon Wear, Golf Digest and GolfTV, and Motor Trend (the 2017 acquisition of which marked the company’s first direct-to-consumer online service in the US), are all signs of how major special interest verticals are becoming global and may be dominated by the owners of online video, not just of print and digital text. And you can imagine the scale of opportunity in product merchandising.
We may expect Discovery to keep making acquisitions of digital media and magazines in sports, travel, science, and food as it develops its global all-media networks. With declining profits, even strong magazine brands and their digital offerings are relatively cheap, especially for companies which have other ways to monetise. For media which can captivate viewers with exclusive video, perhaps magazines will even become stylish content marketing. The Discovery strategy may just help to guide the ambitions of newspapers, magazines and broadcasters who should buy and build multi-platform partnerships to emulate it in their best verticals.
Events. Immediate Media, the UK’s most profitable magazines group, is expanding further into consumer exhibitions with the acquisition of the six-year-old River Street Events, which organises food and gardening events. It is acquiring a majority of the company immediately and will buy the remaining shares in 18 months. Its most successful annual events include the BBC Good Food Show and BBC Gardeners’ World Live (linked to Immediate magazines) which together attract attract over 250,000 visitors. In 2017, the company had revenue of £6.9m and recorded a £364k loss.
It is thought that the price paid will depend on trading in 2019-20, during which the events will continue to be managed by its founder Laura Biggs. The initial payment is no more than £2m. In January, Immediate acquired Upper Street Events, producers of some of the UK’s largest specialist consumer enthusiast exhibitions including the Cycle Show, Festival of Quilts, Move It, London Art Fair and The London Cruise Show. It said then that integrating Upper Street into existing operations would more than double the exhibition company’s £1m profits – even before creating new events. This latest acquisition brings Immediate’s annualised events revenue to £19m – about 7-8% of the total. It is hungry for more.
Immediate is only the latest UK magazine company to chase consumer exhibition profits. Significantly, most UK-based exhibitions companies are preoccupied by B2B not consumer shows and passed up the opportunity to bid for either of the companies acquired by Immediate. The privately-owned Media10 is the country’s largest consumer show organiser with £45m revenue, including the 110-year-old Ideal Home Show. But even it is diversifying into trade shows in the UK and internationally in order to sustain profit growth. However, media everywhere is chasing “experiential” revenues because consumers are responsive. Immediate might just be stepping up its efforts at the right time.
The company – a wholly-owned division of Burda – publishes across special interest sectors, including Food, Cycling, Gardening, Parenting, Weddings and Crafts. Its 75 consumer brands include: BBC Gardeners’ World magazine, BBC Good Food, Mollie Makes, Cycling Plus, Hitched, and Britain’s most profitable magazine, the Radio Times. Immediate has a monthly audience of some 19m people, sells 75m magazines annually, has 90 licensed international editions, is digitally much smarter the magazine-media average – and keeps growing. That’s why its exhibitions strategy is worth watching.
B2B information. Dublin-based ION Investment Group is to acquire a controlling stake in Acuris (publishers of MergerMarket and Debtwire) from BC Partners and GIC. BC and the Acuris management will retain minority stakes, with the former thought to have 24% of the equity. The deal values the company at £1.35m, some four times the price BC paid Pearson for the business six years ago – and 13 x what Pearson had paid seven years before that. ION is backed by private equity group Carlyle and has become a major financial software company across Europe.
Acuris was founded as MergerMarket in 1999 and bought by then Financial Times publisher Pearson for £101m in 2006. It was subsequently acquired by BC Partners for £382m in 2015, with GIC acquiring a 30% stake two years later. Acuris claims 115,000 daily users across 5,000 corporate subscribers, and employs 1,500 staff in 66 locations around the world. It faces increasing competition from Pitchbook (owned by Morningstar) and Bloomberg.
Magazines. Dotdash has bought Brides magazine from Condé Nast after the magazine was touted for sale. Terms were not disclosed. Dotdash is part of InterActiveCorp (IAC) which owns dating sites Match, OK Cupid and Tinder. Brides will join Dotdash’s stable of titles aimed at millennial women including MyDomaine, The Balance and Verywell which in total yield 100m monthly unique visitors. The Brides print magazine will no longer be produced but eight staff will transfer and work on a redesigned website. Brides had 3.6m monthly uniques in March, a figure which has doubled in four years, while print readership has declined to around 300,000.
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